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Introducing Electronic
Workpapers By Tim Louwers and Andrew Roberts To improve their usefulness, audit workpapers should be numbered, referenced, initialed, dated, reviewed (“ticked and tied”), approved, and then initialed by the reviewer. These tasks have traditionally consumed large quantities of audit effort, which could be spent more productively on more critical aspects of the audit. Further, while an audit report barely covers a page, audit workpapers can easily fill many binders. Those binders usually end up in a numbered box in a storage facility with numerous similar boxes containing audit workpapers from other engagements, rarely to be seen again. One effective tool that can reduce the time spent on the tasks noted above, as well as the storage space requirements of hard-copy workpapers, is electronic workpapers. It is now possible to create, share, edit, review, correct, approve, and finalize workpapers without the “paper.” Implementing electronic workpapers can result in improved utilization of auditors’ time and reduced storage costs. This article describes how students can be introduced to electronic workpapers by involving them in the actual development of their own electronic workpapers. When students develop their own workpapers, they gain a much better understanding of how workpapers work (e.g., the interrelationships among workpapers), how they can be electronically enhanced, and how they relate to the overall audit engagement. On the most basic level, implementing electronic workpapers involves utilizing three key tools: (1) software applications, (2) reference functions, and (3) cross-referencing/linking capabilities. The primary applications necessary to implement electronic workpapers include word processing, spreadsheet, and data manipulation software. Word processors (e.g., Word, WordPerfect) have replaced handwriting as the most efficient way to prepare audit reports, memos, letters, and other documents. Spreadsheets (e.g., Excel, Lotus 1-2-3) provide an excellent means for footing data, creating charts and graphs, and performing other calculation-intensive tasks. Data manipulation software (e.g., IDEA, ACL) allows auditors to import large data files and thoroughly analyze them for a large variety of trends and/or indicators. These applications have been developed specifically for the audit function. Reference tools generally include a centralized location for data storage and retrieval, and large databases containing the collective knowledge of an entire audit staff—past and present. Finally, linking and referencing capabilities are perhaps two of the most convenient and timesaving features of an electronic workpaper package. While many accounting/consulting firms have developed their own proprietary versions of electronic workpaper packages, the task of automating workpapers does not necessarily require the purchase of a large, expensive software package. Microsoft’s Office (versions 97 and higher) suite allows users to insert “hyperlinks” into any document created using the Office package, providing the same functionality as is common on the World Wide Web and adding a new dimension to audit workpapers and reports. The hyperlinks manifest themselves as references within a document which link the present section of that document to relevant sections of other documents, providing the user with the ability to quickly switch back and forth between related material spread across numerous documents/files. In the next section, we discuss ways that students can develop their own electronic workpapers. Techniques
for automating workpapers using Microsoft Office The workpaper reviewer must find the referenced workpaper to ensure that the amounts and conclusions on the workpaper are appropriately supported. In most cases (as in the bank reconciliation example), the referenced workpapers are located within the same functional area. There are other cases, however, when the related workpapers may involve two or more functional areas (e.g., the examination of long-term debt area may also reference the bank confirmation) that may involve more than one binder for hard-copy workpapers. With electronic workpapers, provided that the supporting documentation is also an electronic document, the reviewer need only click on the linked reference to pull up the supporting documentation (e.g., a scanned version of a bank confirmation). A.
Linking Workpapers
An alternative method for cross-referencing and linking documents in Word is to insert the object (e.g., the supporting document) on the summary page.
These linking capabilities, intrinsic in all automated workpaper packages, greatly reduce the audit effort necessary to review workpapers. B.
Reviewing Electronic Workpapers
After the properties have been entered, they can be viewed without opening the document:
These Office functions allow a reviewer to check the status of workpapers in order to manage the engagement in an efficient manner. C.
Inserting Comments in an Electronic Workpaper
These electronic “review notes” facilitate communication between reviewer and workpaper preparer through the placement of comments in the area of concern. In this article, we have highlighted three electronic workpaper functions (linking workpapers, reviewing workpapers, and adding comments) that are common in most proprietary audit software packages. After briefly discussing and illustrating these features in the classroom, we usually send two-student teams to gather information on the Internet for a potential client (see the planning exercise in the Appendix). More importantly, the teams are required to document their findings using electronic workpapers that they themselves have created. The assignment can be completed over a weekend, but is dependent on students’ familiarity with the Internet. Feedback from students has been positive; while students are generally familiar with the basic features of Microsoft’s Office suite, they have not explored some of the more useful features of the software package. The assignment also exposes the students to a number of useful sites on the World Wide Web. Tim Louwers teaches Auditing and IS Auditing at Louisiana State University. Andrew Roberts, a recent graduate of LSU, is an Internal Auditor with Professional Resources International in South Bend, Indiana. The authors wish to acknowledge the helpful comments of Barbara Apostolou, Kenny Reynolds, and Mark Taylor on an earlier version of this article. APPENDIX NAME (print)_____________________________________ Audit
Planning in an Electronic Environment
I expect each team to turn in a computer disk in the form of electronic workpapers (LINKED documents, annotated comments, etc.). I suggest a planning memo linking each of the assignments to the summary. Bill Gates has approached your firm to perform a financial audit of his software company. While you are trying to convince Bill that your firm is the right choice, it is important to ensure that his company doesn’t represent a significant risk to your firm or its other business. Some specific concerns include whether your firm has the time and expertise to do the audit, whether your personnel are independent of the client, and whether the potential client, because of litigation or dishonest management, may be a time bomb waiting to explode. To address these concerns, perform the following audit tasks:
Auditors
Sharing Audit Programs (ASAP)
AICPA |