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a) Reasons for maintaining proper audit working papers.
(i). To control the current year’s work. A record of work done is essential for:
• The audit clerk to see that he has done all that he should.
• His supervisor, manager, the partner to whom he is responsible and other persons who will review the work he had done.
• Enabling evidence to be available in the final overall review stage of an audit so as to consider if accounts show a true and fair view.
• Working papers collected in investigation of one part of an enterprise may be used in the verification process for another part.
• The audit of one part of an enterprise is not to be conducted in isolation.
(ii) To form a basis for the plan of audit in the next year clearly a starting point for a year’s audit is the review of the previous year’s work. Rigidly following the same procedures year after year could lead to:
• Client staff getting to know the procedures.
• They could design frauds which the procedures will not uncover.
(iii) Evidence of work carried out.
Audit clerk need to provide evidence to their superiors that they have carried out the work. Evidence of the work carried out may be needed in a court of law.
b) The importance of maintaining the respective document, record and information of the following documents in the permanent file.
• Memorandum and articles of association: show the rules governing the conduct of business.
• Principal activities and locations: to ensure easy accessibility by the auditor during the audit.
• Specific legislation and regulations: show the rules that govern the conduct and activities of the enterprise.
• History including summary of results: to show the history of reserves, provisions, share capital acquisition and records of important account records.
• Key staff: to show their line of responsibility and explain their roles in the business.
• Description of accounting systems and internal control: so as to reveal areas with weaknesses and also to explain the various departments in the business.
• Organisation charts: show the principal departments and subdivisions in the business. It is a clear display of the number of people involved.
• Copy of letter of engagement: it explains the scope of the auditor’s assignment.
Musyoxx answered the question on March 14, 2018 at 16:03
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