05/01/20231

AUDIT WORKING PAPERS

ATTY. RHENEIR P. MORA, CPAMANAGING PARTNER

R. P. MORA & CO.

Outline Purposes and Uses of Working

Papers Working Papers Includes Permanent File Index Current File Index Audit Documentation Matters Affecting the Form

& Content of Working Papers Types of Audit Evidence

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Purposes and Uses ofWorking Papers Serve as basic tools to assist the auditor in the

conduct of the audit. Support the auditor’s opinion on the financial

statements. Substantiate the competence of the auditor’s

examination. Serve as guides in subsequent audits. Aid in giving advice on tax and business matters Provide a basis for evaluation of staff members’

performance.

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WORKING 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.

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Evidence of the planning process including audit programs and any changes thereto.

Evidence of the auditor’s understanding of the accounting and internal control systems.

Evidence of inherent and control risk assessments and any revisions thereof.

Evidence of the auditor’s consideration of the work of internal auditing and conclusions reached.

Analyses of transactions and balances.

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Analyses 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.

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Copies 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 auditor’s procedures were resolved or treated.

Copies of the financial statements and auditor’s report.

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Permanent File Index

I. Information About the Client’s BusinessII. Internal Control System DocumentationIII. Organization and Equity Capital

Articles of Incorporation By-Laws Minutes or Resolution of

Continuing Interest

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Permanent File Index(Cont.)IV. Financing and Other Significant

Agreements and Contracts Bank and Other Financing Agreement Bond Indentures, Mortgages and Trust

AgreementsV. Other Information of Continuing

Relevance Certificates of Registration with Gov’t. or

Regulatory Bodies Tax Information

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Current Index File

I. Auditor’s Report, Financial Statements and General Matters

II. Planning and AdministrationPA Initial Planning Audit ProgramPA1 Initial Planning Memorandum

III. Compliance Test Documentation

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Current Index File (Cont.)

IV. 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

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Current Index File (Cont.)ASSETS (Single Capital Letters)A CashB Trade ReceivablesC Other ReceivablesD InventoriesE PrepaymentsF InvestmentsG Property, Plant and EquipmentH Deferred ChargesI Intangible AssetsJ Other Assets

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Current Index File (Cont.)LIABILITIES (Double Capital Letters)AA Notes Payable and Bank LoansBB Accounts PayableCC Acceptances Payable and Related AccountsDD Accrued LiabilitiesEE Income TaxesFF Other Current LiabilitiesGG Long-Term DebtHH Other Non-Current LiabilitiesII Contingent Liabilities and CommitmentsJJ Stockholders’, Partners’ or Proprietor’s EquityKK Retained Earnings

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Current Index File (Cont.)

INCOME AND EXPENSES (Two-Digit Numbers)10 Sales20 Cost of Sales30 Selling Expenses40 Administrative Expenses50 (60 or 70) Other Groupings of Expense

Accounts80 Other Income or Expenses

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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.

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Matters Affecting the Form and Contents of Working Papers Nature of the engagement. Form of the auditor’s report. Nature and complexity of the business. Nature and condition of the entity’s 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.

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Types of Audit EvidencePhysical ExaminationThird-Party Statements or ConfirmationClient Statements or RepresentationsAuthoritative DocumentationsObservationClerical AccuracyComparison & Data Relationships

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PHYSICAL EXAMINATIONDescription Of General Auditing Procedures

COUNTING OF INVENTORY, CASH, SECURITIES, UNMATURED PROMISSORY NOTES

- To establish existence and, where applicable, ownership and condition of assets

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THIRD-PARTY STATEMENTS OR CONFIRMATIONSOBTAINING CONFIRMATION

DIRECTLY OR DETAILS OF ACCOUNT BALANCES

- To verify validity and accuracy of balances and other information with outside parties.

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CLIENT 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.

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AUTHORITATIVE 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.

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OBSERVATION

OBSERVING THE TAKING OF PHYSICAL INVENTORIES BY CLIENT PERSONNEL OR THE ACTUAL OPERATION OF INTERNAL CONTROL

- To determine compliance with prescribed procedures.

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CLERICAL ACCURACY

RECHECKING CLERICAL DETERMINATION BY CLIENT

- To verify the accuracy of computations and transfers of information made by client.

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COMPARISON 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

ContinuingAuditFile

CurrentWorkingPaper File

RiskAssessment& Planning

JobAdministration

WorkOfOthers

LeadSchedules&SubstantiveWork

FinancialReporting

TransactionProcessingCycles

TransactionProcessingCycles

Evidential Matter(Test of Controls)

AssetsLiabilities&Equity

Profit& Loss

FinancialReporting

WorkingTrialBalances

LeadSchedulesandSubstantiveWork

LeadSchedules

DetailSchedulesandMemoranda

Account 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

B

ABC Corporation

Receivable Lead Schedule

Audit: 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: 12-31-04

B-9PBC

DETAIL OF CURRENT WRITE-OFF Date Customer Amount _4-21-04 Lion King P 25,0814-29-04 Jose Pedal 5,3775-18-04 Atty. Ong 17,3415-20-04 Sec. Bunye – Original 10,093

Various 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.

1

1

2

2

B B

Examples

ANAK NG JUETENG, INC.List of Outstanding ChecksAudit: 12-31-04

A-4PBC

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>A B

B

A Per 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.

B Per 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 <1>Cash P25,962.90 Accounts Payable P25,962.90