Reviewing Working Papers

Read the comprehension case and answer the questions that follow.

Workpapers are required to be reviewed at every supervisory level of a CPA firm. Senior auditors review the work of staff, managers of senior auditors, and partners of managers.

CONCEPT REVIEW:

Senior reviewers are charged with the most technical review$--$ensuring that audit procedures have been performed and that conclusions are appropriate and documented well. Managers and partners review at a higher, less detailed level. They are looking for conclusions, compliance with GAAS, and appropriate documentation. All reviews need to be well documented, signed off, and dated.

Read the comprehension case and answer the questions that follow.

BACKGROUND:

Audit standards require that several levels of review occur. The senior accountants' review is required to ensure that the staff has performed the required audit procedures and that findings and conclusions are well documented. Managers and partners review at a higher level. Their intent is to ensure that GAAS has been applied and met, that conclusions are appropriate, and that the working papers all tie together and no open items exist. A second partner is required to ensure that the quality control process has been met and to provide another opinion on the application and meeting of GAAS requirements.

EKH Industries was audited by BK&D CPAs. Four different individuals performed reviews of the working papers: Sarah A$.,$ Emily R$.,$ Laura B$.,$ and Joe J$.$ Emily's review comments included inconsistent amounts between working papers for the same accounts; for example, the gain on the sale of assets did not match between the property working papers and the cash flow support. Laura's comments indicated inconsistent trends$--$some working papers talked about rising labor costs while others discussed layoffs of plant personnel. Joe documented that cutoff was not properly tested for cash accounts and that accounts receivable testing was missing a conclusion. Sarah indicated that signoffs were not appropriate, the working papers were not dated appropriately, and the drafts had been issued too early.