A Permanent file normally include:
Information concerning the legal and organizational structure of the entity. In the case of a company, this includes the Memorandum and Articles of Association. In the case of a statutory corporation, this includes the Act and Regulations under which the corporation functions.
Extracts or copies of important legal documents, agreements and minutes relevant to the audit.
A record of the study and evaluation of the internal controls related to the accounting system. This might be in the form of narrative descriptions, questionnaires or flow charts, or some combination thereof.
Copies of audited financial statements for previous years.
Analysis of significant rations and trends.
Copies of Management letters issued the auditor; if any.
Record of communication with retiring auditor, if any, before acceptance of the appointment as auditor.
Notes regarding significant accounting policies.
Significant audit observations of earlier years.
A Current file normally include:
Correspondence relating to acceptance of annual reappointment.
Extracts of important matters in the minutes of Board Meetings and General Meetings as relevant to audit.
Evidence of the planning process of the audit and audit programme.
Analysis of transactions and balances.
A record of the nature, timing and extent of auditing procedures performed, and the results of such procedures.
Evidence that the work performed assistants was supervised and reviewed.
Copies of communication with other auditors, experts and other third parties.
Letters of representation or confirmation received from the client.
Conclusions reached the auditor concerning significant aspects of the audit, including the manner in which exceptions and unusual matters, if any, disclosed the auditor’s procedures were resolved or treated.
Copies of the financial information being reported on and the related audit report.
Importance of Working Papers:
It provides guidance to the audit staff with regard to the manner of checking the schedules.
The auditor is able to fix responsibility on the staff member who signs each schedule checked him.
It acts as an evidence in the court of law when a charge of negligence is brought against the auditor.
It acts as the process of planning for the auditor. So that he can estimate the time that may be required for checking of the schedules.
Ownership: Working papers are the property of the auditor. The auditor should adopt reasonable procedures for custody and confidentiality of his working papers and should retain them for a period of time sufficient to meet the need of his practice and satisfy any pertinent legal or professional requirements of records retention. As per NSQC-1, retention period for audit engagements ordinarily is no shorter than five years from the date of the auditor‟s report, or, if later, the date of the group auditor‟s report