What Is Audit Note Book?
The audit clerk faces several challenges during auditing. Since the audit clerk can’t recall everything, they keep a book to record notes of important queries and points that he can refer to when clarifications to the auditor and when confirming the client’s information.
This type of book is known as an Audit Note Book—it is used to note essential information that’ll be included in the auditor’s report.
This book is a complete documentation of doubts and their explanation. It is beneficial for the subsequent audits done by the auditor and is also a guide to other audit clerks.
In general, an audit notebook is a diary kept by the audit staff to note down information that needs further explanation, clarification, and investigation.
This book contains doubtful queries of different accounting records, errors discovered in the course of an audit, and challenges experienced. It is also a part of the long-term audit file.
Another name for an audit notebook is a remembrance book. It contains records of everything that comes to the auditor’s attention during auditing.
In case of any legal action against the auditors, they can use the audit notebook as evidence in their defense. This book is authentic proof supporting the work done by auditors.
An audit notebook can be a permanent file or a bound book of the auditor’s office. Additionally, it can be in loose sheets form—the auditor puts these sheets in a file or folder subsequently in the order of dates for reference in the future.
- Definition of an Audit Notebook
- Contents of Audit Note Book
- Audit Note Book Maintainer
- Advantages & Disadvantages of an Audit Note Book
- Advantages of Audit Note Book
- Disadvantages of Audit Note Book
- Importance Of Audit Note Book
- Frequently Asked Questions
Definition of an Audit Notebook
“An Audit Notebook is an inventory kept by the audit staff to keep records of important information observed, doubtful queries, errors, clarifications, and explanations from the clients”. This book also contains proven records of the work done daily by the audit clerks.
In summary, an audit notebook is generally a bound notebook used by auditors to record a wide range of matters noted in the course of an audit. The notebook must be maintained systematically, clearly, and completely.
It can be used as authentic evidence to support the work performed by an auditor to protect him from any legal charges put against him due to negligence. It is a resourceful guide for carrying out audits for future years, and it also helps the auditor prepare regular audit reports.
Contents of Audit Note Book
Below is a list of various points recorded in an Audit Notebook:
- The audited year and client’s name.
- An inventory account’s books in use
- The type of business conducted and the essential documents connected to the business’ constitution.
- The accounting method is used in the business.
- An audit program copy.
- The technical terms applied to the business.
- Specifics of the financial and accounting system used and the internal check-in procedure followed by the business.
- Information about financial and accounting policies applied in the business.
- Queries and notes that may be needed in the next audit.
- The principal officers’ names, their responsibilities, and duties.
- Detailed information on errors and mistakes discovered.
- Regular queries not cleared like missing vouchers and receipts.
- Matters which require further clarification, such as a shift in the computation of depreciation or the basis of valuation of completed stocks.
- The start and completion date of the audit.
- Extracts from contracts and minutes books and other correspondence with financial institutions, debtors, government agencies, and creditors.
- The issues raised in an audit, to which the audit must draw attention, for instance, if the company fails to comply with the Memorandum of Association or the requirements of the Companies Act and other legal provisions.
- The points to be included in the audit reports.
Audit Note Book Maintainer
An Audit Notebook is an inventory maintained by the audit staff to note vital points, uncertain queries, mistakes, expositions, and client descriptions. In addition to this, it has records of the audit clerk’s day-to-day work.
Working papers are the auditor’s property, and a few states have laws that give the auditor ownership of the working papers. However, the rights of ownership of the auditor are bound by ethical limitations about the personal relationship with clients.
After putting an audit plan together, the auditor assigns the work and makes a program that has steps followed by the audit team when conducting an audit.
Therefore, an auditor draws up a program with comprehensive information about the different audit procedures and actions to be observed by the audit.
Advantages & Disadvantages of an Audit Note Book
The audit notebook helps the auditor to make an audit report. A different audit notebook is maintained for each concern.
Advantages of Audit Note Book
Auditors use audit notebooks when they prepare audit reports. Each concern has its audit notebook. Below are a few advantages of an audit notebook:
1. Audit Report
An audit notebook is essential when preparing an audit report. The auditor can use the audit notebook to record weaknesses or any issues that need clarification. A clear audit report can then be submitted when the auditor clarifies any of the highlighted queries.
2. Staff Honesty
The audit notebook is used to ascertain if audit clerks are honest or whether they have integrity. Audit work usually examines moral and ethical values.
An auditor appreciates work done on time. An individual is held responsible for any pending work after the given period expires.
Honesty is crucial for the audit staff.
3. Helpful for Memory
An auditor can read through the audit notebook daily. This helps him recall the details of the audit. Going through the audit notebook also helps the auditor always to remember the weaknesses identified.
The auditor can ask management to clarify any of the weaknesses identified before making an audit report.
An audit notebook can serve as a valuable source of information for the audit staff in future audits. Data from the past can give an auditor a helpful insight on business matters and note any changes.
Based on the changes noted, the auditor can have an opinion on the size and the nature of the business.
5. New Auditor
An audit notebook is handy for a new auditor. An audit notebook allows a new auditor to identify the weaknesses of previous audits. Therefore, you can avoid such inadequacies in subsequent audits.
6. Court Cases
An auditor can defend himself in court by producing an audit notebook if they are sued for negligence. The audit work serves as written proof of the work the auditor has performed.
Disadvantages of Audit Note Book
- It is a leading cause of misunderstandings: misunderstandings between the audit staff and client staff usually occur due to maintenance of the audit notebook.
- Leads to the development of a fault-finding attitude among the staff.
- The effects on future audits are usually adverse: the audit notebook is used in the subsequent audits. Therefore, any errors made in a previous audit are likely to impact the next audit negatively.
- If the audit notebook is prepared incorrectly, it cannot be used in court as evidence if an auditor is sued for negligence. Therefore, much care has to be taken during the preparation of an audit notebook.
Importance Of Audit Note Book
Justice Williams highlighted the significance of an audit notebook in the following words:
“An audit notebook that contains extensive information is very helpful to an auditor in every critical moment. An audit notebook is also beneficial to an auditor when they are preparing an audit report.”
An audit notebook can also serve as a reference in the future. The notebook can also be presented as evidence in case of a negligence charge.
An auditor can also know his assistant’s work by looking at the audit notebook.
Frequently Asked Questions
1. How Is An Audit Notebook Useful To An Auditor?
The auditor uses an audit book to note all essential points he cites as he conducts an audit that he would otherwise forget. This book can be produced in a court of law as evidence if he is sued for negligence.
2. What Are The Objectives Of Auditing?
An audit is usually conducted to give an opinion on financial statements. An auditor has to go through the books of accounts and the financial statements of a business to verify the fairness of the company’s financial standing and operating results.
3. How is Auditing Done?
An audit analyses the financial records of your business to confirm they are accurate. This analysis is carried out through a systematic review of your transactions.
Copies of accounting books and financial statements are looked into during an audit. Most businesses conduct routine audits once every year.
4. What Is an Audit Example?
By definition, an audit refers to the process of conducting or analyzing an entity to determine if it’s accurate or safe. An audit can also be defined as a document that contains the results of such an analysis.
For example, an audit occurs when a dean goes over your credits to determine eligibility to graduate.
5. How Do I Write An Audit Report?
- First, include the date, time, and location when you begin the audit report.
- Next, explain the criteria you used or the auditors used to carry out the audit.
- Give all the evidence, including the data the auditor recorded, to facilitate the audit process.
Jot down the final verdict of the audit clearly and concisely.