Audit Notebook

What is an Audit Notebook?

An audit notebook is a part of audit working papers that keeps a record of a wide range of matters that are observed during the course of the audit for which answers provided by the client are either not satisfactory or which must be included in the audit report.

It is a diary or register that the audit staff keeps to note down any errors or irregularities discovered during the audit.

When the auditor classifies his working papers into permanent and current audit files. Of which audit notebook is a part of the current working paper file because it is obligatory to maintain a fresh audit notebook for each financial year.

It is one of the segments of auditor’s records of permanent nature which is available for the purpose of reference in the future, whenever required. It is in two parts:

• One that keeps a record of general information, relating to the audit as a whole.
• One that enters special points that are discovered during the audit process of different years.

Importance of Audit Notebook

An audit notebook is pertinent for an auditor particularly for the preparation of an audit report, which is to be submitted to the shareholders of the company. It is important because:

1. An auditor can use it as evidence when a charge of negligence is registered against the auditor.
2. It facilitates the auditor to know the actual volume of work performed by his/her audit staff.
3. It helps in future reference and acts as a guide to draft audit programme in future, as the points noted down in the notebook highlight the loopholes in the accounting system of the client which must be considered.
4. It also helps the auditor for correlating the audit work if the related assistant is not present or the work is halted for the short term.
5. It also records different queries that came up during the course of the audit and their state of disposal.
6. Further, with regard to disposed queries, explanation received and evidence encountered, would be recorded and those queries which are not disposed of would be noted for the purpose of follow up.

Contents of Audit Notebook

There is a list of matters which the audit notebook incorporates, this includes:

• List of account books that the client maintains.
• Details of main officers, their powers, duties, and responsibilities.
• Method of accounting adopted by the firm
• Technical jargon used in business
• Points that need more explanation.
• Particulars of vouchers that are missing and duplicates are to be gathered.
• Commencement and completion date of the audit
• Any mistake, irregularity, or error identified during the course of the audit.
• Total or balances of different books of accounts.
• Notes or queries needed for performing the subsequent audits.
• Points included in the audit report.
• Provisions in the company’s memorandum and articles of association can affect the account and audit.
• Matters requiring discussion with the auditor or any senior official.
• Audit queries that are not disposed of immediately.
• Extracts of minutes and contracts that influence the company’s accounts.
• Relevant information about the company, which is not evident from the books of accounts.
• Points that require to be taken into account while verification of annual accounts.

Objectives of Audit Notebook

The objectives of the audit notebook are discussed hereunder:

To facilitate future audit: Current year’s audit notebook facilitates the auditor when he commences audit in the subsequent year. It helps in understanding the areas requiring special consideration and attention.

To provide documentary evidence: It acts as evidence concerning the extent of work performed and the level of skill and care employed by the auditor while carrying out an audit. He can use it as documentary evidence to defend himself when a charge of negligence is filed.

To prepare audit report: It is quite obvious that the auditor cannot keep all the irregularities and important matters and audit findings, in his memory, which require consideration at the time of preparation of the audit report. Hence, if the auditor maintains an audit notebook, it helps in the preparation of the audit report.

To resolve queries arising at the time of audit: The client’s accounting staff may feel annoyed when the auditor comes up with queries before them on a frequent basis, during the course of the audit. And so, for the convenience of the client’s staff, audit queries must be noted down in the book whenever they arise and put before the staff for explanation altogether.

To evaluate work: If the auditor goes through the audit notebook, it is easier to understand the progress of the audit work performed and the efficiency level of the audit staff.

Wrap Up

An audit notebook is a perfect guide for future reference. It also ensures that the audit programme has been applied appropriately. Further, the responsibility of the errors that remain unidentified can be fixed on the staff concerned. It also keeps a record of day-to-day work performed by the audit clerks. It must be noted that the audit notebook needs to be maintained in a clear, complete, and systematic manner.