The Review of Audit Working Papers by the Audit Partner Is Normally Completed

Since the issuance 14 years ago of the current audit documentation standards [now AU-C 230 and PCAOB Auditing Standard (Equally) 1215, respectively], which are more robust than their predecessors (see this author's "Audit Documentation: It'south a Whole New World,"The CPA Periodical, June 2005, http://bit.ly/2W43HWO), many auditors have held the mistaken conventionalities that the standards require all workpapers to bear dated sign-offs of preparers and reviewers, and many firms have adopted this excessive do equally policy.

On the other side of the money, another misconception that has been unremarkably observed in the peer review process was pointed out in an commodity by Ahava Goldman, Charles Landes, and Carl Mayes, Jr. ("Audit Documentation: Tips for Getting it Correct,"Journal of Accountancy, June 2017, http://scrap.ly/2XYezHs), namely that an inspect program sign-off is sufficient to meet the documentation requirements of the standard. While an audit program sign-off "might address the nature of the process, who performed information technology [and when]," and thus, in some cases, may come across part of the specific requirements that are the principal subject of this commodity, it ordinarily falls brusque of meeting the requirement to document who reviewed the work and when, also as other more formidable requirements of the applicative documentation standard, such every bit documenting details of the items tested, results of the tests, significant findings, professional person judgments applied, and conclusions reached.

What Do the Auditing Standards Actually Say?

In general, the auditing standards of the Auditing Standards Lath (ASB) and of the PCAOB crave firms to establish and maintain a system of quality control (QC) in compliance with the applicable QC standards (AU-C 220.03 or Every bit 1110.02). Pursuant to the QC standards, particularly those related to engagement performance, through a review of the audit documentation and discussions with others on the date team, the engagement partner must "exist satisfied that sufficient appropriate inspect evidence has been obtained to support the conclusions reached and for the auditor's report to be issued" (AU-C 220.nineteen). The engagement partner "need non review all audit documentation" but should review all critical areas of judgment, especially those relating to difficult or contentious matters or significant risks identified during the appointment and other areas that he considers important, and "must document the extent and timing of the review" (AU-C 220.A17).

The audit supervision and documentation standards of both the ASB and the PCAOB crave that the preparer and reviewer exist identified in the audit documentation along with the date the work was performed (AU-C 230.09b-c or AS 1201.05c and Equally 1215.06b); nonetheless, the standards exercise not require a 2nd sign-off by a reviewer on every workpaper. "The requirement to document who reviewed the audit work performed and the extent of the review does non imply a need for each specific working newspaper to include evidence of review" (AU-C 230.A15).

When preparer/reviewer sign-offs relate to groups of work-papers, it should exist clearly documented which workpapers they encompass.

Information technology should exist noted that the auditing standards cited above also apply to interim reviews conducted under AU-C 930 or Equally 4105 for SEC issuers and other audit clients (AU-C 220.01 or Equally 1215.01 and Every bit 4105.52, respectively), as well every bit all audit engagements.

When May the Appointment Partner (or a Qualified Designee) Be the Only Signer?

Occasionally (and specially on smaller engagements), a workpaper is prepared by the engagement partner (or by the customer), and the partner or some other key member of the date team is the only reviewer. Consistent with the applicable standards, it is recommended that if a certificate prepared by the date partner involves the awarding of any significant auditing procedures or complex analysis, the partner should sign as preparer, and the workpaper should be reviewed and approved past another appropriately experienced accountant (which demand non be another partner). In fact, depending on its content, any auditor can be judged qualified to review whatsoever workpaper, regardless of who prepared it. For case, if the review entails only checking the math and tracing the data to its source, even an inexperienced auditor can practise information technology. If in that location is a meaning decision that entails substantial research or judgment, concurrence from the appointment quality reviewer (if any) or another partner or manager ordinarily should be obtained and documented on the workpaper or elsewhere, such every bit in a consultation memorandum, specially for an interim review if it will affect the year-end audited financial statements.

Neither the engagement partner nor whatsoever other fellow member of the engagement squad should sign off equally a reviewer of his or her own work but should sign as preparer, and the date partner (or a qualified designee) may determine judgmentally if a reviewer is necessary, based on take a chance and significance, subject to the concurrence of the external quality review (EQR) reviewer, if whatsoever. Either the engagement partner or a designee may sign off every bit a reviewer of a client-prepared or provided certificate.

Three Primal Takeaways

• It is not necessary for every workpaper to have dated sign-offs of both preparer and reviewer. Discretion is permitted, based on risk and significance, as to which items require a documented review.
• When preparer/reviewer signoffs relate to groups of workpapers, it should be clearly documented which workpapers they encompass.
• Engagement partners should sign as preparer, not reviewer, on workpapers containing their own piece of work, but may decide judgmentally, as well based on risk and significance, if a review (which could be done past a manager or other qualified designee) is necessary.

To What Extent Do These Standards Apply to Engagements for Nonaudit Clients?

Review engagements for nonissuer clients and compilations are governed by the AICPA'due south Statements on Standards for Accounting and Review Services (SSARS), which accept broader, less specific documentation requirements than the auditing standards to exist applied as deemed necessary to be consistent with the AICPA's QC standards. Like audits, these engagements are to be conducted mostly within the context of the firm's system of QC maintained in conformity with the QC standards, especially those related to engagement performance, and the firm'south practices must meet the objectives and principles set along in the QC standards (QC x.A34-.A35). There are, however, no specific requirements in the SSARS applicable to the nature and extent of date supervision, including workpaper review or the documentation thereof. Nevertheless, it is mutual to observe the aforementioned practices relative to preparer and reviewer signoffs for SSARS review engagements every bit for those covered by the auditing standards. As for compilation engagements, since no assurance is provided, the responsible engagement partner may be allowed greater discretion every bit to such matters, subject field to the foregoing.

Howard B. Levy, CPA is a primary and director of technical services at Piercy Bowler Taylor & Kern, CPAs, Las Vegas, Nev., and an independent technical consultant to other professionals. He is a erstwhile member of the AICPA Auditing Standards Board and its Accounting Standards Executive Committee, and a electric current fellow member of its Heart for Inspect Quality's Smaller Firms Task Force. He is a member of The CPA Journal Editorial Advisory Board.

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Source: https://www.cpajournal.com/2019/04/23/the-truth-about-workpaper-sign-offs/

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