Kel from Accounting Elf asked;
“Can you give an example of how to be “meticulous” in one workpaper versus your wanting to just do the testing and include the purpose and procedures? What are the things you do from there to make it “meticulous”?”
I was working on an audit today with a junior. He gave me a schedule of invoices he had vouched. At the top of his schedule he wrote the test he was performing, its purpose and the conclusion.
In his purpose he wrote; “To ensure transactions have occurred” but his conclusion said “These expenses are not materially misstated.” That’s not technically right. Just because the transactions occurred, didn’t mean the expenses weren’t materially misstated. What if his sample included expenses for the following year? What if they were denominated in a foreign currency? An account balance can be misstated for each assertion, so you can’t say it’s free of material misstatement after testing only one.
I made him change, “These expenses are not materially misstated” to “Transactions supporting these expenses have occurred.” It’s really nit-picky and I felt like a tool when I was explaining why he needed to change it. But that’s the difference between being meticulous and just wanting to get it done. If our partner read the working paper he’d likely understand what my co-worker was trying to say. But you don’t get better with that kind of attitude and your work won’t stand out.
Here’s a list of things I do to ensure I’m on top of things.
- Every number is referenced. If I’m referencing up the file, the reference goes on the right and if I’m referencing down it goes on the left.
- There’s logical flow. For instance, “Understanding the nature of the entity” will go from vague to specific – i.e. industry, company history, press releases, control environment, organizational chart, accounting cycles (purchases, receipts, payroll etc.). I picture it like an upside down pyramid. And once I can conceptually go from big (industry) to small (accounting cycles) I know I’m ready to draft my audit strategy. From a general audit strategy I can drill down further and identify the audit procedures
- Everything conceptually ties in. For example, if I said something was a significant issue in my audit plan, I’ll do more testing in that section.
- My writing is legible and neat. If your writing is neat, it looks like you’ve taken your time when you did the work.
- I give my schedules to people and ask them to explain what I’ve done. If they can’t, then I’m not being clear. People should be able to look at your schedules and just understand them. You shouldn’t have to explain them.
I hope that helps a bit.