Today, I offer you a list of forty work paper mistakes. If you’re an auditor or you perform review engagements or compilations, you’ve seen these–or if you’re like me, you’ve make some of these errors.
The list is based on work paper reviews I’ve done over the last thirty-seven years (and not on any type of formal study).
You will, I think, shake your head in agreement as you read them. Why? Because you’ve seen these too.
No references to supporting documentation in the audit program
Using canned audit programs that aren’t based on risk assessments for the particular entity
Not documenting expectations for planning analytics
Inadequate explanations for variances in planning analytics (“revenue went up because sales increased”)
Planning analytics with obvious risk of material misstatement indicators, but no change in the audit plan to address the risk (sometimes referred to as linkage)
Assessing the risk of material misstatement at low without a basis (reason) for doing so
Documenting significant risks (e.g., allowance for uncollectible receivable estimates in healthcare entities) but no high inherent risks (when inherent risk are separately documented)
Not performing risk assessment procedures for all significant transaction areas (e.g., risk assessment procedures performed for billing and collections but not for payroll which was significant)
Not retaining the support for opinion wording in the file (especially for modifications)
Specific items tested are not identified (e.g., “tested 25 disbursements, comparing amounts in the check register to cleared checks” — we don’t know which particular payments were tested)
Making general statements that can’t be re-performed based on the information provided (e.g., “inquired of three employees about potential fraud” — we don’t know who was interviewed or what was asked or their responses)
Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses.
He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events.
Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.
Thanks, Sandeep.
Thanks, Gabrielle.
Thanks, Petro. Learning is endless, indeed.
Thank you so much Charles
Thanks much Charles Hall for your summary. Learning is endless project.
Thank you for sharing.
Thanks, Gregory.
Very good article!!!!
Thanks, Zach. I enjoy doing so!
You are welcome, Resty.
Knowing you, Armando, you probably never did. 🙂
Thank you for sharing Charles
Charlie, this is not for me as I never, ever made even a small mistake.
Ha ha ha.
Thanks for posting
Thank you for sharing your very useful experience with the next generation!