The auditing guideline on „recording‟ requires audit working papers to be sufficient complete and detailed so that an experienced auditor who has no previous connection with the audit is able to subsequently ascertain from working papers the work performed and to further support the conclusions reached thereon. Required: Outline the contents of a typical: Current audit file; and Permanent audit file

Current Audit File (CAF):

This file will contain matters only relevant to the current year‘s audit only. It will contain:

•  A copy of the accounts being audited signed by the directors;
•  A file index showing the contents of the file;
•  A description of the internal control system inform of questionnaires, flowcharts or forms of documentation;
•  Audit programmes showing the audit objectives and planned audit procedures for each of the areas to be audited;
•  A schedule of each item in the balance sheet. Each schedule should show:
  – Balance at the beginning of the year, changes during the year and balance at the end of the year.
  – Details of work performed on each balance, results and the conclusions made
•  A schedule for each item in the profit and loss account showing the audit work carried out, results obtained and the conclusion reached;
•  Check list for compliance with statutory disclosure requirements and accounting standards;
•  Record of queries raised during the audit and coming forward from previous audit.
• Schedule of important statistics e.g. output, net profit margin, gross profit margin, sales composition, liquidity ratios;
•  A record or abstract from the minutes of:
  – The company
  – The directors
  – Any internal committee of the company whose deliberations are important to the auditor.
•  The management letter setting out weaknesses in the internal control;
  Letters of representation obtained from the client‘s management.

Permanent Audit File (PAF):

The permanent file usually contains documents and matters of continuing importance, which are required for more than one financial period. Information contained in a PAF include:

•  Statutory material: governing the conduct of the audit e.g. for companies, the Companies Act (Cap 486). For a quoted company a copy of the Nairobi Stock Exchange regulations (NSE) is required.
•  Rules and regulations of the enterprise. E.g. for a company, the Memorandum and Articles of Association. For a partnership, a partnership agreement.
•  Copies of documents of continuing importance and relevance to the auditor. -Letter of engagement and minutes of appointment of the auditor.
  – Trade license.
  – Debenture deeds.
  – Lease agreements
  – Guarantees and indemnities entered into.
•  Addresses of the registered office and all other premises with a short description of the work carried on at each.
•  An organisation chart showing: –
  – Principal departments and subdivision thereof.
  – Names of responsible officials showing lines of responsibility.
•  A list of directors their shareholdings and service contracts;
•  A list of company‘s advisors, bankers, stockbrokers, solicitors, valuers.