Are Your Work Paper Dates Revealing Incorrect Audit Sequences?
Audit file work paper dates are telling.
They can tell us something good, or they can tell us something bad.
There is a certain order in audits, and dates tell whether we performed the engagement is the correct order.
Work Paper Dates
Using a June 30, 2024 year-end audit that starts on August 20, 2024 and ends on September 15, 2024, here are examples of improper work paper dates:
Engagement letter dated September 10, 2024 — should be August 20 or earlier.
Engagement acceptance or continuance workpaper dated September 10, 2024 — should be August 20 or earlier
Walkthrough workpapers dated September 13, 2024 and risk assessment summary dated August 22, 2024 — Walkthroughs should precede the risk assessment summary (how can we assess risk when we don’t know if controls were operational?)
Audit programs were completed on August 27, but several related work papers were dated September 7 and later. Sign off on audit programs as you perform the work.
Audit representation letter is dated September 12, 2024, but the opinion is dated September 15. The dates should be the same.
Audit partner’s first sign offs are on September 14. Evidence the engagement partner was not sufficiently involved in the engagement, especially the planning part.
The brainstorming work paper is dated September 14. Fraud brainstorming should occur early in the engagement before planning (before creating audit programs).
The fraud inquiries of client personnel are dated September 12. They should occur early in the audit and are part of the risk assessment.
The quality control review was completed on September 25, 2024, but the audit opinion is dated September 15. The financial report is released on September 17. The engagement is not complete until all requisite reviews are performed. Engagement partner and quality control reviews should occur before the opinion date. What if significant issues are noted in the quality control review performed on September 25, but the statements have already been released?
The financial statement release date is September 17 but the lockdown of the file is December 28, 2024. Lockdown should occur within 60 days of the release.
These are examples of dates that don’t align. There are others.
Wrong dates = Wrong methods
And wrong dates can tell a peer reviewer we didn’t perform the engagement in the right order.
The Right Audit Order: 12 Steps
So, what’s the right order for an audit?
Here’s a general guideline for the order of an audit (and work paper dates):
- Complete client acceptance and continuance document. Obtain your engagement letter before the audit starts.
- Perform risk assessment, including the following:
- Preliminary analytics
- Walkthroughs of all significant audit areas
- Gain your understanding of the entity and its environment
- Perform fraud inquiries
- Perform a retrospective review of key estimates
- Synthesize the information from step 2 and create your risk assessment.
- Create responses (audit programs) based on step 3.
- Perform planned audit procedures.
- See if any new risks come to light. If they do, tweak your risk assessment and planned responses. Perform any new planned procedures.
- Review the completed file to ensure compliance with standards and completeness.
- Create your audit report and other communications, including:
- Letter to those charged with governance
- Internal control letter (or report if a Yellow Book engagement)
- Representation letter
- Have quality control review the completed file and respond to those review comments.
- Obtain a signed representation letter after the client reviews the financial statements and accepts responsibility.
- Issue the audit report and other communications.
- Perform a post-audit review to see if there are ways to improve next year.
Document your work paper dates as you perform these procedures.
Summary of Work Paper Dates
The order of an audit matters, and work paper dates matter.
Consider providing your staff members with the suggested order above.
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