PowerPoint Presentation
11/16/20111AUDIT WORKING PAPERSLOPE L. BATO, JR.Managing
PartnerQCB & Co., CPAsOutlinePurposes and Uses of Working
PapersWorking Papers IncludesPermanent File IndexCurrent File Index
Audit DocumentationMatters Affecting the Form & Content of
Working PapersTypes of Audit Evidence
11/16/20113Purposes and Uses ofWorking Papers Serve as basic
tools to assist the auditor in the conduct of the audit.Support the
auditors opinion on the financial statements.Substantiate the
competence of the auditors examination.Serve as guides in
subsequent audits.Aid in giving advice on tax and business
mattersProvide a basis for evaluation of staff members
performance.11/16/20114WORKING PAPERS ORDINARILY
INCLUDE:Information concerning the legal and organizational
structure of the entity.Extracts or copies of important legal
documents, agreements and minutes.Information concerning the
industry, economic environment and legislative environment within
which the entity operates.11/16/20115Evidence of the planning
process including audit programs and any changes thereto.Evidence
of the auditors understanding of the accounting and internal
control systems.Evidence of inherent and control risk assessments
and any revisions thereof.Evidence of the auditors consideration of
the work of internal auditing and conclusions reached.Analyses of
transactions and balances.11/16/20116Analyses of significant ratios
and trends.A record of the nature, timing and extent of audit
procedures performed and the results of such procedures.Evidence
that the work performed by assistants was supervised and
reviewed.An indication as to who performed the audit procedures and
when they were performed.Details of procedures applied regarding
components of business whose financial statements are audited by
another auditor.11/16/20117Copies of communications with other
auditors, experts and other third parties.Letters of representation
received from the entity.Conclusions reached by the auditor
concerning significant aspects of the audit, including how
exceptions and unusual matters, if any, disclosed by the auditors
procedures were resolved or treated.Copies of the financial
statements and auditors report.11/16/20118Permanent File
IndexInformation About the Clients BusinessInternal Control System
DocumentationOrganization and Equity CapitalArticles of
IncorporationBy-LawsMinutes or Resolution of Continuing
Interest11/16/20119Permanent File Index(Cont.)Financing and Other
Significant Agreements and ContractsBank and Other Financing
AgreementBond Indentures, Mortgages and Trust AgreementsOther
Information of Continuing RelevanceCertificates of Registration
with Govt. or Regulatory BodiesTax Information11/16/201110Current
Index FileAuditors Report, Financial Statements and General
MattersPlanning and AdministrationPA Initial Planning Audit
ProgramPA1 Initial Planning MemorandumCompliance Test
Documentation
11/16/201111Current Index File (Cont.)Substantive TestsWORKING
TRIAL BALANCES AND ADJUSTMENTSST Substantive Test Program
SummaryWBS Working Balance SheetWPL Working Profit and LossTB Trial
BalanceAJE/RJE Summary of Adjusting/Reclassifying Journal
EntriesPJE Summary of Passed Journal Entries
11/16/201112Current Index File (Cont.)ASSETS (Single Capital
Letters)A CashB Trade ReceivablesC Other
ReceivablesDInventoriesEPrepaymentsFInvestmentsGProperty, Plant and
EquipmentHDeferred ChargesIIntangible AssetsJOther Assets
11/16/201113Current Index File (Cont.)LIABILITIES (Double
Capital Letters)AANotes Payable and Bank LoansBBAccounts
PayableCCAcceptances Payable and Related AccountsDDAccrued
LiabilitiesEEIncome TaxesFFOther Current LiabilitiesGGLong-Term
DebtHHOther Non-Current LiabilitiesIIContingent Liabilities and
CommitmentsJJStockholders, Partners or Proprietors EquityKKRetained
Earnings11/16/201114Current Index File (Cont.)INCOME AND EXPENSES
(Two-Digit Numbers)10Sales20Cost of Sales30Selling
Expenses40Administrative Expenses50(60 or 70) Other Groupings of
Expense Accounts80Other Income or Expenses11/16/201115
PSA 210 ON AUDIT DOCUMENTATIONSection 2.The auditor should
document matters which are important in providing evidence to
support the audit opinion and evidence that the audit was carried
out in accordance with Philippine Standards on Auditing.Section
5.The auditor should prepare working papers which are sufficiently
complete and detailed to provide an overall understanding of the
audit.11/16/201116Matters Affecting the Form and Contents of
Working PapersNature of the engagement.Form of the auditors
report.Nature and complexity of the business.Nature and condition
of the entitys accounting and internal control systems.Need in the
particular circumstances for direction, supervision and review of
work performed by assistants.Specific audit methodology and
technology used in the course of the audit.11/16/201117Types of
Audit EvidencePhysical ExaminationThird-Party Statements or
ConfirmationClient Statements or RepresentationsAuthoritative
DocumentationsObservationClerical AccuracyComparison & Data
Relationships11/16/201118PHYSICAL EXAMINATIONDescription Of General
Auditing Procedures
COUNTING OF INVENTORY, CASH, SECURITIES, UNMATURED PROMISSORY
NOTES
- To establish existence and, where applicable, ownership and
condition of assets11/16/201119THIRD-PARTY STATEMENTS OR
CONFIRMATIONSOBTAINING CONFIRMATION DIRECTLY OR DETAILS OF ACCOUNT
BALANCES
To verify validity and accuracy of balances and other
information with outside parties.
11/16/201120CLIENT STATEMENTS OR REPRESENTATIONSOBTAINING
CLIENTS REPRESENTATION LETTER, EXPLANATIONS TO MANY DIVERSE
QUESTIONS RAISED DURING THE AUDIT
To obtain knowledge and understanding about the client and its
circumstances.11/16/201121AUTHORITATIVE DOCUMENTATIONEXAMINING (OR
VOUCHING) PAID CHECKS, VENDORS PRUCHASE ORDERS, RECEIVING REPORTS,
TITLES, CONTRACTS AND OTHER DOCUMENTARY MATERIALS.
- To verify the validity and propriety of accounting treatment
of transactions and account balances and compliance with internal
controls.11/16/201122OBSERVATIONOBSERVING THE TAKING OF PHYSICAL
INVENTORIES BY CLIENT PERSONNEL OR THE ACTUAL OPERATION OF INTERNAL
CONTROL
- To determine compliance with prescribed
procedures.11/16/201123CLERICAL ACCURACYRECHECKING CLERICAL
DETERMINATION BY CLIENT
- To verify the accuracy of computations and transfers of
information made by client.11/16/201124COMPARISON AND DATA
RELATIONSHIPSCOMPARING CURRENT PERIOD ACCOUNT BALANCES OR OPERATING
DATA WITH SIMILAR INFORMATION FOR PRIOR PERIODS AND INVESTIGATING
UNUSUAL DATA RELATIONSHIPS.
-To disclose and determine the reasons for significant
changes.
Working PaperOrganization Chart
ContinuingAuditFileCurrentWorkingPaper FileRiskAssessment&
PlanningJobAdministrationWorkOfOthersLeadSchedules&SubstantiveWorkFinancialReportingTransactionProcessingCyclesTransactionProcessingCyclesEvidential
Matter(Test of Controls)AssetsLiabilities&EquityProfit&
LossFinancialReportingWorkingTrialBalancesLeadSchedulesandSubstantiveWorkLeadSchedulesDetailSchedulesandMemorandaAccount
LevelEvidential Matter(Substantive Testing) B-10
B-9 2-1
B-9 2
B-9 1
B-9
B-5 2/2
B-5 1/2
B-1
Indexing
BABC CorporationReceivable Lead ScheduleAudit: 12-31-2005
If there are two or more pages comprising a given schedule, the
pages are marked to indicate both the particular page and the
number of total pages (see B-5 above).Detailed work of an account
balance could be supported by several tiers of supporting schedules
using fractional indexing (see B-9 above) 2003 2004 _Balance
Beginning of Year P130,089 P151,691 Write-offs ( 71,087) ( 62,439)
Provision 92,689 83,994_Balance End of Year P151,691 P173,246
========= =========
Examples
ANAK NG JUETENG, INC.Analysis of Reserved for Doubtful
AccountsAudit: 12-31-04B-9B. Cruz1-24-05PBCDETAIL OF CURRENT
WRITE-OFF Date Customer Amount _4-21-04Lion King P
25,0814-29-04Jose Pedal 5,3775-18-04Atty. Ong 17,3415-20-04Sec.
Bunye Original 10,093Various amounts under P1,000 4,547_2004
Write-Offs P 62,439 ==========Examined write-off form approved by
the controller noting agreement of date, customer and amount all
write-offs over P1,000.Accumulated write-offs under P1,000 from
detail maintained by the credit manager noting agreement.Traced to
Prior Year Audit Working Papers noting agreement.Footed by QCB
& Co. and agrees.1122BB
Examples
ANAK NG JUETENG, INC.List of Outstanding ChecksAudit:
12-31-04A-4B. Cruz1-20-05PBC Amount _P 991.90 15,000.00 2,001.03
12,576.13 2,790.29 1,745.75 8,941.86 49,810.73 15,439.75 4,989.51
5,533.64P122,410.43==========Examined cancelled checks returned by
bank together with the December 2005 bank statement, noted in
order.Examined check register and noted that these were not
acknowledged received by the payee in December 2004. Footed by QCB
& Co. and agrees.P25,962.90=========Reviewed the list of
outstanding checks noting no unusual or significant items except
for & as discussed below.NOTE 1>ABBAPer review of the vendor
invoices and receiving reports, this check is for lumber and
supplies purchased for the additions to the building site. See
extracts from the board of directors meeting minutes at XX for
further discussion.BPer discussion with Gen. Garcia, Comptroller,
these checks dated 12/30/04 were not released to the vendors until
1/2/05 as all authorized check signers were on vacation. Based on
the dates these checks cleared the bank per our review on the
January 2005 bank statement, this explanation is reasonable. Thus
the following adjustment is proposed to properly state cash and
accounts payable at 12/31/04:PAJE CashP25,962.90 Accounts Payable
P25,962.90
