INSTRUCTIONS

2
INSTRUCTIONS

This practice aid is intended to help auditors document the results of testing while meeting the
requirements of AU-C section 230, Audit Documentation. This publication is an other auditing
publication as defined in AU-C section 200, Overall Objectives of the Independent Auditor and the
Conduct of an Audit in Accordance With Generally Accepted Auditing Standards (AICPA,
Professional Standards). Other auditing publications have no authoritative status; however, they
may help you, as an auditor, understand and apply certain auditing standards.

In applying the auditing guidance included in an other auditing publication, the auditor should,
exercising professional judgment, assess the relevance and appropriateness of such guidance to
the circumstances of the audit. The auditing guidance in this document has been reviewed by the
AICPA Audit and Attest Standards staff and published by the AICPA and is presumed to be
appropriate. This document has not been approved, disapproved, or otherwise acted on by any
senior technical committee of the AICPA.
Client Name Working Paper #
Working Paper Title Preparer
Balance Sheet Date Date Completed
Prepared By Client? Reviewer
Date Reviewed

Objective
If not addressed elsewhere in the audit file (e.g. in the audit program), describe the nature of the procedures to be performed and the
assertion(s) being tested.

Results of Procedures and Evidence Obtained

In this section, document the results of the audit procedures performed. The form and content of the documentation will depend on the
nature of the procedures performed; however, the documentation must be sufficient to enable an experienced auditor, having no
previous connection to the audit, to understand the extent of the auditing procedures performed, the results of those procedures, and
the audit evidence obtained.

Documentation should
- Include the identifying characteristics of the specific items tested;
- Demonstrate that accounting records agree or reconcile with the audited financial statements or other audited information; and
- Include any significant findings or issues, as well as actions taken to address them (including any additional evidence obtained).

Tickmarks can save the auditor time and space by explaining procedures performed in one centralized location. Commonly used
tickmarks appear in the "Tickmark Legend" below.

Tickmark Legend
F Footed
CF Crossfooted
Ç Calculation checked and agreed
PY Agreed to prior-year's working papers
TB Agreed to trial balance
GL Agreed to general ledger
R Agreed to report
C Agreed to confirmation
T Traced to (describe source)
 Ⓐ Ⓑ Ⓒ Ⓓ Use to explain procedures and findings
① ② ③ ④ Use to cross-reference items within the working paper
ü Use to indicate a test was performed and no exceptions were noted

Conclusion
If significant findings or issues were noted, document the conclusions reached thereon, and significant professional judgments made in
reaching those conclusions
Client Name Example Company Working Paper # EX-1
Working Paper Title Planning Analytics - Sales and CGS Preparer ABC
Balance Sheet Date 12/31/20x6 Date Completed 3/15/20x7
Prepared By Client? No Reviewer DEF
Date Reviewed 3/31/20x7

Objective
To analyze changes in account balances and other related metrics in order to identify areas that may represent specific risks
relevant to the audit.

Results of Procedures and Evidence Obtained

Expectations
① Example Company is the world's premier provider of widgets. Widget demand has been strong this year, with 10% growth in the
industry during 20x6. We expect to see a 10 - 15% increase in sales, with a similar increase in accounts receivable.
② Per inquiry of Joe Smith, COO, increased demand has led Example Company to expand their capacity, purchasing a new
production facility for $2M and financing the full amount with a long-term note payable. Because the note was issued in December
20x6, any increase in interest expense is expected to minimal.
③ The COO also indicated that Example Company has adopted a new inventory management approach which has improved their
inventory turnover by 10%.

Trend Analysis Days Sales in Receivables

Current year 161 days
Current year Prior year $ Change % Change Prior year 141 days
Sales 2,500,000 FS 2,175,000 PY 325,000 14.94% Ç % increase 14.18%
Cost of goods sold 1,780,000 FS 1,566,000 PY 214,000 13.67% Ç
Gross margin 720,000 FS 609,000 PY Ç Inventory turnover
Gross margin as a % of sales 28.80% 28.00% Ç Current year 1.84 times
Selling expenses 230,000 FS 184,000 PY 46,000 25.00% Ç Prior year 1.67 times
Interest expense 43,000 FS 42,000 PY 1,000 2.38% Ç % increase 10.18%

Balance Sheet Ratio Analysis

Current year Prior year
Accounts receivable, net 1,100,000 FS 843,000 PY
Inventory 1,000,000 FS 832,000 PY
Notes payable 437,000 FS 437,000 PY

Tickmark Legend
Ç Calculation checked and agreed
FS Agreed to financial statements
PY Agreed to prior-year's working papers
① Increase in sales and days sales in receivables of 15% and 14%, respectively, is consistent with
expectations.
② Slight increase in interest expense is consistent with expectations. However, the lack of any
change in notes payable indicates the $2M note which Example Company entered into in
December may not be properly recorded. This warrants further exploration on in the notes
payable section of the audit file at working paper ###.

③ Change in inventory turnover is consistent with expectations.

Conclusion
Changes in revenue, cost of goods sold, and related accounts were consistent with expectations with the exception of notes
payable, which showed no change despite a new $2M note signed in December. Additional consideration appears on working
paper ###.
Ç
Ç
Ç

Ç
Ç
Ç
Client Name Example Company 2 Working Paper # EX-2
Working Paper Title Short-Term Notes Receivable Preparer GHI
Balance Sheet Date 12/31/20x6 Date Completed 2/18/20x7
Prepared By Client? No Reviewer JKL
Date Reviewed 2/25/20x7

Objective
To verify that the notes receivable appearing on the balance sheet exist, Example Company 2 has rights to them, and their
valuation is appropriate.

Results of Procedures and Evidence Obtained

Accrued
Interest
Customer's Name Interest Rate Issue Date Maturity Date Face Amount 12/31/20x6
Customer A 7% 11/17/20x6 2/19/20x7 112,000.00 T, C 945.00 Ç
Customer B 9% 9/15/20x6 3/30/20x7 330,000.00 T, C 8,707.00 Ç
Customer C 10% 9/1/20x6 1/5/20x7 72,000.00 T, C 2,387.00 Ç
Customer D 8% 7/24/20x6 3/18/20x7 91,000.00 T, C 3,191.00 Ç
Customer E 9% 8/21/20x6 1/11/20x7 54,000.00 T, C 1,758.00 Ç
Customer F 11% 10/30/20x6 4/29/20x7 95,000.00 T, C 1,775.00 Ç
Customer G 8% 12/15/20x6 6/30/20x7 219,000.00 T, C 768.00 Ç
973,000.00 19,531.00
F, TB F, TB

Tickmark Legend
T Traced face amount, interest rate, issue and maturity dates to note receivable documents
C Agreed to confirmation
Ç Calculation checked and agreed
F Footed
TB Agreed to trial balance

Conclusion
Verified existence and rights by examining notes receivable document. Based on 100% confirmation and inquiry of
controller (who confirmed collectibility of all accounts), valuation appears appropriate and no loss provision appears
necessary.
Verified existence and rights by examining notes receivable document. Based on 100% confirmation and inquiry of
controller (who confirmed collectibility of all accounts), valuation appears appropriate and no loss provision appears
necessary.