Hello! I am a new auditor. I had a general question about auditing: When auditing an entity, I guess there aren't requirements for HOW MUCH workpapers you need? Do you basically just get as much info and do as much testing as you have to, in order to get enough assurance? And also, are there rules for different areas you have to look at? Do you need to look at Revenues, Expenses, Fixed Assets, Inventory, etc. Or again, do you just get enough info and do enough testing for assurance? Thanks, Russell
The question of how many workpapers is enough workpapers is certainly subjective and circumstantial. When it comes to an audit, you want to be "reasonably certain" an assertion made on the financial statements (any of the numbers or information you can reporting on) is true. Therefore, you have to do enough substantive testing and analytical procedures necessary to reach a comfort level that you feel is defensible in court.
Think of it this way, let's say you audit a client and sign off on their financial statements, then later that client gets sued by someone who claims the financial statements you signed off on are misleading... how confident are you? Will you be going to that courtroom with your head high, ready to answer any and all questions? Will you have enough workpapers to back up your work, proving to the jury that the work you did correctly allowed you to form an opinion of their financial statements?
If you feel you can take the witness stand and defend your work, then you have enough workpapers to provide some assurance. Then the factor of "reasonable assurance" is when you feel like another unrelated, normal person (a jury) would side with you in our hypothetical lawsuit above.
As for the rules of the different areas, that'd be too broad of a topic to cover in this forum. You'll have to learn Generally Auditing and Assurance Standards (GAAS) for that. There are specific rules for what you need to look at, based on the level of engagement (what is being asked of you), the type of entity (private, public, government), and more relevant information.