PA 503 FUNDAMENTAL OF AUDITING CHAPER 5

GROUP MEMBER :

UMMI SARAH BINTI ABD KGUPOR

QURATULAINI BINTI HASRI

NOR SHAWAL LEILA BINTI ZAHARUDIN

NURAZARIAH BINTI RAHIMAN

NUR HUZAIFAH BINTI ZULKIFLI

5.1 KNOW THE NATURE OF AUDIT DOCUMENTATION

5.1.1 Define the nature of audit documentation

5.1.2 Describe the purpose of audit documentation

AUDIT DOCUMENTATION

Audit documentation that meets the requirements of this ISA and the specific documentation requirements of other relevant ISAs provides :

a) Evidence of the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor

b) Evidence that the audit was planned and performed in accordance with ISAs and applicable legal and regulatory requirements

TYPES OF AUDIT DOCUMENTATION

Internal Documentation

Relating to financial transaction that are prepared & used within the client’s organisation without ever going to an outside party such as a customer or vendor

Eg: Cheque request form, Payroll time card, adjusting journal entry & receiving report.

External documentation

Originate with an outside party or was originally an internal document that went to an outside party & is now either in the hands of the client or is readily accessible.

Eg: Suppliers invoice, vendors cancelled cheque or cancelled note & validated deposit slip.

It also can be independent verified, auditors usually place more reliance on them than on internal documents produced within the organisation.

PURPOSE OF AUDIT DOCUMENTATION

Assist the engagement team in planning and performing the audit

Assists reviewers in carrying out their responsibilities in accordance with ISA 220 and professional standards

Assist the engagement team to demonstrate that the audit work was performed properly

Record matters of continuing significance for future audits of company

5.2 UNDERSTAND THAT AUDIT PROGRAMME

5.2.1 Define the audit programme5.2.2 Provide the sample of audit

programme5.2.3 Construct the advantages and

disadvantages of using the audit programme

5.2.1 Define The Audit Programme

Detailed listing of the steps to be performed as part of the procedures to complete an audit

Provides guidance as to what the audit personnel involved need to do and set out the nature, timing, and extent of planned audit procedures required to implement the overall audit plan

5.2.2 Sample Of Audit Programme

1. Cash2. Inventory3. Account Payable4. Account Receivable

5.2.3 Advantages Of Using Audit Programme

Supervision of work

Systematic uniformity of work

Basic instrument for training

Several audit maybe control

Easy transfer

Final review

5.2.3 Disadvantages Of Using Audit Programme

Audit program increases the chance of

fraud

Possibility of being unsuitable

Audit program is unsuitable to small

concern

Exclusion of problem of new technology

5.3 LEARN ABOUT THE AUDIT WORKING PAPER

5.3.1 Discuss the nature of audit working paper :

a) Purposesb) functionsc) Contentsd) Format

MEANING OF AUDIT WORKING PAPER

The material that auditors prepare or obtain and retain in connection with the performance of the audit

May be in the form of data stored on paper, film, electronic media and also be used in court in case of negligent audit

PURPOSES OF AUDIT WORKING PAPER

Assist in the plannig and performance of the audit

Assist in the supervision and review of audit work

Record the audit evidence resulting from the audit

work performed to support the auditors opinion

Constitute a permanent record of the objective

and scope of the audit as well as the work

performed during the audit

FUNCTION OF AUDIT WORKING PAPER

State a clear audit objective

State the name of client, subject matter,

year/period end

Reference of linked document

How sample size were determined

The conclusion reached should be consistent

with result of the test

Signed and date by prepared and reviewer

CONTENT OF WORKING PAPER

Audit programmes. Grouped account schedules. Lead schadules. Analysis. Memorandum. Letters of confirmation. Copies or representatives abstract of

company documents. Flowcharts and questionnaires. Various other forms and practice aids.

FACTOR EFFECTING THE FORM AND CONTENT OF THE AUDIT

WORKING PAPERS

Nature of the engagement Forms of the auditors report Nature and complexity of the business Nature & condition of the entity

accounting & internal control system Needs in the particular circumstances

for direction, supervision, and review of work performed by assistants.

Specifis audit methodology & technology used in the course of audit.

FORMAT OF AUDIT WORKING PAPER

The name of the client

Period covered by the audit

Subject matter

File reference

The initials (signature) of the member of

staff who prepared the working paper and

the date which it was prepared

FORMAT OF AUDIT WORKING PAPER

Uniform working paper format may not be used but work paper for functional areas such as cash receipt should display conformity in various types of audit

Working papers may be in the form of paper, tapes, disks, diskets and film.

Should be backup copies of electronically generated working paper and should not be stored with original copies.

5.3.2 DISCOVER THE SYMBOLS USED IN AUDIT WORKING PAPER ‘N/A’ ( explain why the procedures or

test does not apply). ‘o’ (casted) ‘Ob’ (have checked and agreed with

Opening Balance) ‘Cb’ (have checked and agreed with Closing

balance) <C 12> ‘cross reference’ (usually document

can refer to supporting documents). ‘Pv’ (checking with payment Voucher) ‘Inv’ (Checking with invoice)

5.4 LEARN ABOUT THE AUDIT FILE

5.4.1 Define types of audit file :

a. Permanent audit fileb. Current audit filec. Correspondance files

PERMANENT AUDIT FILE The permanent file usually contains documents and

matters of continuing importance of clients’ businesses which will be required for more than one audit.

Below are some of the documents and records auditors would keep in:

Minute of board meeting Lease agreement Schedule of capital asset and capital stock The charted of corporation Description of the accounting method,

policy and internal control system of the company

Copy of articles of association Copy of memorandum of associaton Letter of engagement Types of Bankers Types of Legal adviser

CURRENT AUDIT FILEConsist of working papers containing information primarily related to the purposes of the current audit

Purpose : Evidence of the planning process Evidence of the auditor’s understanding

of the accounting and internal control system

Analysis of transaction and balance

Contain :> Audit and audit programme’s copies> Clearance the problem and confusion during the time of audit work> Bank reconcilatation statement> Paper of calculation of tax bonus> List of lost proofs> Paper regarding stock revaluation

CORRESPONDENCE FILES

Correspondence file should contain all correspondence and letters with the client company or with the authorities such as the Inland Revenue, the Registrar of Companies, and other matters concerning the client company’s affairs.