Explain the advantages and disadvantages of audit notes audit files and working papers
Answers
Some the advantages of audit note book are given below:
1. Audit note book enables the auditor to record important points, which arise during the course of his audit; otherwise he might forget these points.
2. An auditor can produce this book as a documentary evidence in a suit filed against him for negligence or misfeasance.
3. It facilitates the preparation of the audit report.
4. If the assistant in charge is changed before the completion of a particular work, it acts as a guide and makes the completion of balance work easier.
Disadvantages of Audit Note Book
There are, however, certain disadvantages of audit note book. They are as follows:
1. Very often, it creates misunderstanding between the client staff and the audit staff.
2. If it is not properly and carefully prepared it cannot be used as evidence against the auditor for negligence.
3. It develops a fault finding attitude in the minds of the staff of the audit.
4. Audit staff has to depend too much upon the client’s staff for its preparation.
Advantages of Audit Files:-
Advantages
a. Access to the capital market:
The public has to remain under the security exchanges and the requirements given under it. Once the auditing is done the accounts that are audited are easily accepted by the Government such as Central banks, public authorities. This carries greater authority standards for the account to be authorized.
b. Lower capital cost:
This has reduced information that is associated with the financial statements that have lower interest rates and return on their investments. Sometimes this activity provides facilitated settlements and claims of a partner. By performing the process of auditing frauds and errors can be rectified on time.
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Disadvantages of Audit Files:-
a. Extra cost:
Testing involves the extra cost to the organization which is considered as a burden. It involves the disruptions of multiple cases. The auditor has to concentrate more even though there are disruptions. Before the audit begins the auditor must get the attention of all the staff members of the organization.
b. Evidence:
Evidence that are identified are more pervasive than conclusive. The strength of submission of audited accounts makes major changes in the accounts of distribution of profits.
Working Papers:-
Advantages
This improves the efficiency the efficiency with which they are prepared.They act as guidelines or instructions to audit staff and facilitates delegation of workThey provide a means to control the quality of audit work by ensuring that minimum quality standards are maintained.Ensures that all relevant issues in the audit area are addressed.
Disadvantages
It is not appropriate to follow mechanically a standardized approach to the conduct and documentation of the audit work without regard to the need to exercise judgment.Work becomes mechanicalClient’s staff may become familiar with the method.The initiative of the audit staff may be stifled.
Several obstacles confront the audit clerk during the course of the audit. He is unable to recall everything at all times. As a result, he keeps a notebook with him in which he jots down crucial issues and questions that he needs to refer to the client's personnel or clarify with the chief auditor. Audit Note Book is an example of such a book.
The following are some of the benefits of using an audit notebook:
1. An audit notebook allows the auditor to keep track of key topics that arise during his audit; otherwise, he may forget them.
2. In the event that an auditor is sued for carelessness or misfeasance, he might submit this book as documentary evidence.
3. It makes the audit report production easier.
However, there are several drawbacks to using an audit notebook. The following are the details:
1. It frequently leads to misunderstandings between the client and the audit team.
2. It cannot be used as evidence against the auditor for negligence if it is not properly and meticulously prepared.
3. It instils in the audit personnel a fault-finding mindset.