10 Steps to Better Audit Workpapers

In this post, I provide ten steps to better audit workpapers.ย
Have you ever been insulted by a work paper review note?
Yourย tickmarksย look like something my six-year old created.ย
Rather than providing guidance, the comment feels like an assault.
Or maybe as a reviewer you stare at a workpaper and you’re thinking, “what the heck is this?”ย Your stomach tightens and you say out loud, “I canโt understand this.”
There are ways to create greater audit workpaper clarity.
10 Steps to Better Audit Workpapers
Here are ten steps to make your workpapers sparkle.
- Timely review. The longer the in-charge waits to review work papers, the harder it is for the staff person to remember what they did and, if needed, to make corrections. Also, consider that the staff person may be reassigned to another job. Therefore, he may not be availableย to clear the review notes.
- Communicate the purpose.
a. ย An unclear work paper is like a stone wall. It blocks communication.
b. ย State the purpose; for example:
Purpose of Work Paper โ To search for unrecorded liabilities as of December 31, 2018. Payments greater than $30,000 made from January 1, 2019, through March 5, 2019, were examined for potential inclusion in accounts payable.
Or:
Purpose of Work Paper โ To provide a detail of accounts receivable that agrees with the trial balance; all amounts greater than $20,000 agreed to subsequent receipt.
If the person creating the work paper canโt state the purpose, then maybe there is none. It’sย possible that the staff person is trying to copy prior year work that (also) had no purpose.
c. ย All work papers should satisfyย a part of the audit program (plan). No corresponding audit program step? Then the audit program should be updated to include the stepโor maybe the work paper isn’t needed at all.
3. ย The preparer should sign off on each workpaperย ย (so itโs clear who created it).
4. Audit program steps should be signed off as the work is performed (not at the end of the audit–just before review). The audit program should drive the audit processโnot the prior year workpapers.
5. ย Define tickmarks.
6. ย Reference work papers. (If you are paperless, use electronic links.)
7. ย Communicate the reason for each journal entry.
The following explanation would not be appropriate:
To adjust to actual.
A better explanation:
Toย reverse client-prepared journal entry 63 that was made to accrue the September 10, 2018, Carter Hardware invoice for $10,233.
8. ย ย When in doubt, leave it out.
Far too many documents are placed in the audit file simply because the client provided them.ย Moreover, once the work paper makes its way into the file, auditors get “remove-a-phobia“–that dreaded sense that if the auditor removes the work paper, he may need it later.
If you place those unneeded documents in your audit file and do nothing with them, they may create potential legal issues.ย I can hear the attorney saying, “Mr. Hall, here is an invoice from your audit file that reflects fraud.”
Again, does the work paper have a purpose?
My suggestion for those in limbo: Place them in a “file 13” stack until you are completely done. Then–once done–destroy them. I place these documents in a recycle bin at the bottom of my file.
9. ย Complete forms.ย Blanks should not appear in completed forms (use N/A where necessary).
10. Always be respectful in providing feedback to staff. Itโs too easy to get frustrated and say or write things we shouldnโt. For instance, your audit team is more receptive to:
Consider providing additional detail for your tickmark: For instanceโAgreed invoice to cleared check payee and dollar amount.
This goes over better than:
You failed to define your tickmark–again?
Last Remarks
What other ways do you make your audit workpapers sparkle? Comment below.
The AICPA provides a sample workpaper template that you may find helpful.ย
You may also be interested in a related post: How to Review Financial Statements.
Also, see Audit Documentation: Peer Review Finding.ย
Gosh Christopher. You sound just like me. I have said this (about the N/A) many times, but few seem to concur.
Thanks John. If only I could remember to do these things. I’ll keep trying.