I m writing my blog after a long time. Yeah, I know very well.
Actually, I was there on a never ending audit of a textile mill which came to a full stop for a while just a few days ago.
It was seriously never ending one.
We audited Purchases, Sales & the most hard working work… Physical Verification of Fixed Assets, Raw Material, Semi Finished Goods, Finished Goods of all types, Stores & Spare parts. And, afterwards, HR (Contractor Part). And then Limited Review & then Tax Audit. What are you thinking that it was really a never ending one???? True dear!! We all are exhausted from this. And, have no interest in going there again. ROFL!!
I want to share one of my best as well as the the most tiring experience with you guys. Well you can guess that what it must be relating to. It is regarding the Physical Verification of Finished Goods,i.e., Fabric. Before commencing the process, everyone gave us the best wishes for doing it as it is the most complicated one because we have to do physical verification of that which is of different types, different shades, and different meter wise pieces which was scattered in a big hall. And, it took 5 to 6 days in completing its audit.
And, just after its completion, every person we met asked only one question, “Mam, Please tell is there shortage or excess?” And, we guys were like “ohh come on, please give us some time to reconcile it from the stock mentioned in Books”.
After doing that, I can say confidently that I can do physical verification of any type of product in any condition because I think that was the worst one we did.
Well, I hope all the Chartered Accountancy students already know about the importance of Audit Documentation especially those who have crossed CA- IPCC Group II and studied SA 230 ,i.e., AUDIT DOCUMENTATION. My this article will help you all in enhancing your knowledge about it.
The skills of an auditor can always be ascertained by his Working Papers.
Working Papers should document about the following:
- The work has been adequately planned & supervised.
- Internal control has been appropriately studied & evaluated.
- Purpose of work.
- Nature, Timing and Extent (NTE) of audit procedures performed.
- The evidence obtained and procedures performed are reasonable to form an opinion.
- Source of information analyzed & supporting evidences obtained, examined & evaluated.
- Conclusions reached.
So it means if we don’t document, then we haven’t audited as per law. That’s why, audit documentation is very important. Besides this, it allows seniors to review audit works performed by their juniors. It also acts as an evidence in the court of law when a charge of negligence is brought against the auditor.
As per Companies Act, Working Papers are the property of the auditor. So the auditor is entitled to retain them. He may at his discretion, make portions of or extracts from his working papers to his client. In case of a company, the main auditor has to consider the report of the branch auditor & has a right to seek clarification & to visit the branch office but can’t ask even for the copy of the working papers.
I hope now you all clearly understood about audit documentation. And now many of you will you will be having a question in their mind about its retention, i.e., for how much time they should be stored. As per SA 230, it should be long enough to get any legal or professional requirement ( no specified limit ). But as per Standard Quality Control (SQC1), firms should establish policies for retention period of working papers. It should be kept up to 7 years from the date of auditor’s report.
I hope my article helped you all in enhancing your knowledge about audit documentation.