Question

Could you please answer and explain this question for me......

Internal auditors are required to document their work in working papers that provide complete, accurate,
and concise documentation of the engagement process. Discuss the potential adverse consequences of poorly
prepared internal audit working papers.

Answer 1

Worksheet prepared by the Internal Auditor, such as a risk and control matrix used to document process-level risk, key control descriptions, the internal auditor's evaluation of control design adequacy, the tests of controls performed, and the test results.

Other types of working papers prepared by the Internal Auditor that reflect work performed for eg. analytical procedures, computerized data analysis, and direct tests of transactions, events, account balances, and performance measurements.

Common Types of Working Paper prepared by Internal Auditor:

1) Evidences compiled by the auditee and tested by the Internal Auditor

2) Controls performed by the auditee and re-performed by Internal Auditor. Example-Bank Reconciliation.

3) Written correspondence and documentation of Oral Correspondence with the Auditee during the engagement.

4) Internal Audit Team's write-ups of Observations, recommendations, and conclusions.

5) Final engagement communication and management's responses.

Guidelines to be followed by Internal Auditor while preparing Internal Auditor:

1) Should be standardized as appropriate to streamline the audit process, facilitate consistent high-quality work across engagements, and simplify review of the working papers, but not overly standardized so that they inhibit internal auditor ingenuity and creativity.

2) Should be complete and well organized.

3) At the end of Audit Engagement, the files should contain only the final versions of the working papers completed during the engagement.

4) Each Individual working paper should stand on its own merits.

Consequences of poorly prepared internal audit working papers:

1) Ineffective and/or inefficient planning and performance of audit engagements.

2) Inadequate supervision and review of audit work completed.

3) Failure to achieve audit engagement objectives.

4) Inadequate support for Internal Audit communications.

5) Insufficient basis for evaluating the internal audit function's quality assurance program.

6) Sub-optimal professional development of the Internal Audit Staff.

7) Non-compliance with the IIA's Standards.