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Unformatted text preview: dules and other information related to any audit
report in sufficient detail to support the auditor’s conclusions, for a period of not
less than 7 years.
7-19 Audit schedules should include the following:
Name of the client Enables the auditor to identify the appropriate file to
include the audit schedule in if it is removed from the files.
Period covered Enables the auditor to identify the appropriate year to
which an audit schedule for a client belongs if it is removed from the files. 7-10 7-19 (continued)
Description of the contents A list of the contents enables the reviewer to
determine whether all important parts of the audit schedule have been
included. The contents description is also used as a means of identifying
audit files in the same manner that a table of contents is used.
Initials of the preparer Indicates who prepared the audit schedule in case
there are questions by the reviewer or someone who wants information
from the files at a later date. It also clearly identifies who is responsible for
preparing the audit documentation if the audit must be defended.
Date of preparation Helps the reviewer to determine the sequence of the
preparation of the audit schedules. It is also useful for the subsequent year
in planning the sequence of preparing audit schedules.
Indexing Helps in organizing and filing audit schedules. Indexing also
facilitates in searching between related portions of the audit documentation.
7-20 The permanent file contains data of an historical and continuing nature
pertinent to the current audit. Examples of items included in the file are:
4. Articles of incorporation
Bylaws, bond indentures, and contracts
Analysis of accounts that have continuing importance to the auditor
Information related to the understanding of internal control:
internal control questionnaires
5. Results of previous years' analytical procedures, such as various ratios
and percentages compiled by the auditors
By separating this information from the current year's audit files, it becomes
easily accessible for the following year's auditors to obtain permanent file data.
7-21 The purpose of an analysis is to show the activity in a general ledger
account during the entire period under audit, tying together the beginning and
ending balances. The trial balance includes the detailed make-up of an ending
balance. It differs from an analysis in that it includes only those items comprising
the end of the period balance. A test of reasonableness schedule contains
information that enables the auditor to evaluate whether a certain account
balance appears to be misstated. One example of a test of reasonableness
schedule is a schedule that compares current year expenses to prior years'
amounts. This type of schedule is intended to show which accounts need
investigation due to significant variances.
7-22 Unanswered questions and exceptions may indicate the potential for
significant errors or fraud in the financial statements. These should be investigated
and resolved to make sure that financial statements are fairly presented.
The audit files can also be subpoenaed by courts as legal evidence.
Unanswered questions and exceptions may indicate lack of due care by the auditor.
7-11 7-23 Tick marks are symbols adjacent to information in audit schedules for the
purpose of indicating the work performed by the auditor. An explanation of the
tick mark must be included at the bottom of the audit schedule to indicate what
was done and who did it.
7-24 Audit files are owned by the auditor. They can be used by the client if the
auditor wants to release them after a careful consideration of whether there might
be confidential information in them. The audit files can be subpoenaed by a court
and thereby become the property of the court. They can be released to another
CPA firm without the client's permission if they are being reviewed as a part of a
voluntary peer review program under AICPA, state CPA society, or state Board
of Accountancy authorization. The audit files can be sold or released to other
users if the auditor obtains permission from the client.
7-25 When evidence can be examined only in machine-readable form, auditors
use computers to read and examine evidence. There are commercial audit
software programs designed specifically for use by auditors, such as ACL
Software and Interactive Data Extraction and Analysis (IDEA). Spreadsheet
software packages can also be used by auditors to perform audit tests on data
that is available only in machine-readable form.
7-26 The purposes of audit documentation software are to convert traditional
paper-based documentation into electronic files and to organize the audit
documentation. The benefits of audit documentation software, such as Automated
Client Engagement (ACE), are as follows:
The auditor can more efficiently prepare a trial balance, lead
schedules, supporting audit documentation, financial statements,
and ratio analysis using the computer rather than by hand. The effects...
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This note was uploaded on 02/04/2014 for the course ACCOUNTING 211 taught by Professor Alikapur during the Fall '13 term at American University of Sharjah.
- Fall '13