Seven Excuses for Unnecessary Audit Work Papers

Excuses for unnecessary workpapers

Unnecessary audit work papers create clutter and potential legal problems.

I see two problems in most work paper files:

(1) Too much documentation, and
(2) Too little documentation

I have written an article titled: Audit Documentation: If Itโ€™s Not Documented, Itโ€™s Not Done. Since Iโ€™ve already addressed the too little documentation issue, Iโ€™ll now speak to the other problem: too much documentation.

unnecessary audit work papers

Unnecessary Audit Work Papers

Over the last thirty-five years, I have reviewed audit files for CPA firms and have commonly asked this question: Why is this work paper in the file?

Here are a seven answers Iโ€™ve received.

1. It was there last year.

But is it relevant this year? Resist the temptation to mindlessly bring forward work papers from the prior year. Performing a proper audit entails risk assessment (e.g., walkthroughs, analytics), planning (i.e., creating an audit plan), and execution (i.e., carrying out the audit plan). Likewise, compilations and reviews should reflect current year planning and performance.

2. The client gave it to me.

Inexperienced auditors tend to put everything given to them in the file. Some auditors believe โ€œif the client gave it to me, it must be important.โ€ But this is not necessarily true. Every work paper needs a purpose.

3. I may need it next year.

Then save it for next yearโ€”somewhere other than in the current file. If the information does not provide current year engagement evidence, then it does not belong in the file.

Consider creating a file for next year and placing next yearโ€™s information in that file. Or create a folder in the current year file titled: Nextย yearโ€™s work papers. Then move this section to next yearโ€™s file as you close the engagement.

4. I might need it this year.

Before going paperless (back in the prehistoric days when we moved work papers with hand trucks [icon name=”smile-o” class=”” unprefixed_class=””]), I kept a manila folder titled: File 13. The physical folder was my hang-on-to-it-in-case-I-need-it repository.

Since my files are now paperless, I create an electronic folder titled Recycle Bin that sits at the bottom of my file. If I receive information that is not relevant to the current year (but there is a chance I will need it), I move it to the recycle bin, and when I am wrapping up the engagement, I dispose of the folder.

5. Itโ€™s an earlier version of a work paper.

Move earlier versions of work papers to your recycle binโ€”or delete them.

6. I need it for my tax work.

Then it belongs in the tax file (unless itโ€™s related to your attest work – e.g., deferred taxes).

7. We always do this.

But why is it being done this year? Maybe a fraud was missed ten years ago and the partner said, from now on we will…

Are these procedures still relevant?

The test of details, substantive analytics, and test of controls should be in response to the current year audit risk assessment and planning.

Reducing Legal Exposure

The most important reason for minimizing work paper content is to reduce your legal exposure. Excess work papers may provide ammunition to an opposing attorney:ย โ€œMr. Hall, here’s a work paper from your own audit file that reveals fraud was occurring, and you didn’t see it?โ€ (So donโ€™t, for example, leave the full general ledger in your work papers.)

What are your thoughts about removing unnecessary audit work papers?

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