What is Audit Notebook? An auditor has right to conduct an audit of any business under an agreement. When the audit work is in progress he can note some important points.
The audit report is based on these weak points. The people cannot keep ever point in their minds. There is need to write down facts and figures in one place so that these matters may not go out of mind.
An audit notebook is a bound book or loose leaf card book. It can provide the complete picture of the business matters.
The name of the client is started. The nature of a business is recorded. The name of officers is disclosed. The copies of documents collected from the client.
See Also: What is Audit Working Paper
The extracts from various contracts, agreements minutes and other record are taken. The discovered errors are noted. The queries may be made.
The page numbers of journals and ledgers are noted. An audit notebook provides a complete scene of business functions. There is a separate notebook for every audit.
Definition of Audit Notebook
Eric L. Kohler says that audit notebook is a record containing data on work done and comments outside of the regular subject matter of working papers.
Audit notebook contains items as audit program notations showing how sections of an audit are carried out during the successive examination, information needed for the auditors’ office and for staff administration, personnel assignments, time requirements and notations for use in succeeding examination. It may be a part of a permanent file.
Content of Audit Notebook
GENERAL INFORMATION
- NATURE OF BUSINESS
The audit notebook contains information about nature of the business .It may relate to manufacturing, trading, financial or services. The auditor states the exact nature of work being done.
- ACCOUNTS BOOKS
The audit notebook contains the details of accounting books. The Companies Ordinance 1984 is followed by limited companies.
See Also: What is Audit Sampling
The cooperative societies keep books under societies rules 1927 and for others, it may be optional.
- BUSINESS DOCUMENTS
The audit notebook provides details about important business documents. The partnership deed, memorandum of association, and articles of association are documents, which show insight into the business.
- OFFICERS’ DUTIES
The audit notebook provides the name officers working in the business. The duties of such officers are stated in it. The responsibility is noted to check the performance of all officers.
- CLIENT ADDRESS
The audit notebook shows the name and address of his client. He may be a sole trader, partnership firm, and a limited company. The complete address of the business place and head office is necessary.
- AUDIT YEAR
The audit notebook can disclose the year of an audit of accounting books and other records. When the audit is for a special period it may be less than one year. The time period is essential information.
- ACCOUNTING SYSTEM
The audit notebook shows the system of accounting being followed in preparing the financial statements and other records. The effective system provides feedback for checking the books of accounts.
- ACCOUNTING POLICIES
The audit notebook provides information about accounting policies being used by the accounting staff.
The principle of consistency help to follow the same policies from year to year and change can be disclosed.
- INTERNAL CHECK SYSTEM
The audit notebook can provide an idea about internal check system. If it is effective the auditor can apply test need of thorough checking.
- AUDIT PROGRAMME
The audit notebook keeps details of audit program, which is being followed for completion of audit works.
This program distributes the work among the audit staff with reference to timing and Instructions.
See Also: Advantages of Test Checking
SPECIAL INFORMATION
- QUERIES
The audit notebook provides details about the queries made by the audit staff. The unanswered queries are recorded in their book for completing the report. The management may fail to answer properly to the questions raised.
- ERRORS DISCOVERED
The audit notebook provides information about the errors discovered during audit work. The management may rectify the mistakes to show time and fair view.
- LEGAL REQUIREMENT
The audit, notebook shows that management has followed the legal requirements for doing business. It may relate to books of accounts, labor laws, tax laws and similar other formalities.
- EXTRACTS
The audit notebook can disclose the extracts taken from contracts, agreements, minutes and other records. These extracts help the auditor to report on the financial matters of business.
- WEAK POINTS
The audit notebook contains information about the weak points. There may be errors. The vouchers may be missing. The queries may not be replied properly.
- CLARIFICATION
The audit notebook has a record of clarification obtained from management on various points. The entries may not be self-explanatory so the auditor can get information.
- AUDIT TIMING
The audit notebook can show date and time of an audit. The date can be fixed with the customer after mutual understanding. The date and time can show the progress of work done by audit staff.
- BUSINESS MATTERS
The audit notebook can provide facts and figures about all business matters. A business concern can perform many functions.
The matters can relate to almost all functions. These matters can be stated in the audit report.
- INFORMATION
The audit notebook can help important information about accounting books and records.
The page numbers of accounting journals and ledgers are recorded moreover the serial number of vouchers examined are also stated.
See Also: Clerical Mistakes in Auditing
Advantages of Audit Notebook
- AUDIT REPORT
The audit notebook is helpful to prepare the audit report. The auditor ‘can record the weakness of accounting records.
The queries not properly answered are stated in the audit report. When the auditor is satisfied he can submit a clean report.
- STAFF HONESTY
The audit notebook is used to determine the integrity and honesty of audit clerks. The moral and ethical values can be examined through audit work.
When a person completes his work in time, the principal auditor can appreciate him. If there is pending work after the expiry of the time period, he can be held responsible for it.
- HELPFUL FOR MEMORY
The audit notebook is helpful to keep things fresh in memory. The auditor can read the book on daily basis. He can note the weakness on fingertips.
The auditor can retain the data in his memory for a longer period of time. He can ask the management to clear the doubtful points before preparing the audit report.
- REFERENCE
The audit notebook is useful for reference. In future, it can provide information to audit staff. The past data gives an insight into business matters.
The auditor can note the changes. He can form an opinion about changes in the nature and size of the business.
- NEW AUDITOR
The audit notebook is useful for new auditors. They can see the weakness of previous years. The old weak points may not be repeated this year.
See Also: Manipulation of Accounts in Auditing
The performance of management is noted whether previous objections have been cleared or not.
- CASES
The audit notebook is helpful to defend an auditor in court cases. The people can go to a court of law in order to fix the liability of auditor for the negligence of duty. The audit notebook is a written proof of work performed by an auditor.
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