A notebook prepared by the audit staff to note down all the uncleared queries that the auditor(s) may find in the audit requires further clarification, and explanation is defined as an audit notebook.
Meaning of Audit Notebook
Audit Notebook is a diary for auditors to record observations, errors, doubtful queries, explanations, and clarifications to be received from the clients.
The audit notebook is a register maintained by the audit staff to record important points observed, errors, doubtful queries, explanations, and clarifications to be received from the clients.
Mostly the audit notebook contains information regarding day-to-day work performed by the audit staff on any particular date.
Notes about all types of errors, difficulties, and uncleared queries or points to be discussed with the auditor or clients and the points to be incorporated in the report are noted.
An audit notebook is a diary on which auditors scribble down all crucial inquiries to avoid the possibility of unquestioned material facts.
Contents of Audit Notebook
An audit notebook is a diary for auditors to record all crucial inquiries, observations, explanations, errors, and clarifications to avoid the possibility of unquestioned material facts. Some of the points which are noted down in an Audit Notebook are given below:
General Information
- The nature of the business carried on and the important documents relating to the constitution of the business.
- The name of the client and the audit year.
- A list of books of accounts in use.
- Names of principal officers, their duties, and responsibilities.
- Particulars of the accounting and financial system followed and the internal check-in operation in the business.
- Details regarding accounting and financial policies followed in the business.
- A copy of the audit program.
- The technical terms used in the business.
- Notes and queries which might be required at a subsequent audit.
- The accounting method is followed in the business.
Special Matters to be recorded in the Audit Notebook
- Routine queries not cleared, i.e., missing receipts and vouchers, etc.
- Details of mistakes and errors discovered.
- The points raised during an audit to which the auditor’s attention must be drawn, i.e., the company’s failure to comply with the provisions of the Companies Act or the Memorandum of Association and other legal requirements.
- Extracts from minutes, books and contracts, and correspondence with various government agencies, financial institutions, debtors, creditors, etc.
- The points to be incorporated into the audit report.
- The points which need further explanation and clarification, e.g., a change in the basis of valuation of finished stocks or the computation of depreciation, etc.
- Date of commencement and completion of the audit.
Advantages of Audit Notebook
The audit notebook helps the auditor to prepare an audit report. A separate audit notebook is maintained for each concern.
Audit Report
The audit notebook helps prepare an audit report. The auditor can record the weakness of accounting records. The queries not properly answered are started in the audit report.
When the auditor is satisfied, he can submit a clear report.
Staff Honesty
The audit notebook is used to determine the integrity and honesty of audit clerks. The moral and ethical values can be examined through audit work.
When a person Completes his work in time, an auditor can appreciate him. If there is pending work after the expiry of the period, he can be held responsible for it.
The audit staff must be honest in their work.
Helpful for Memory
The audit notebook helps to keep things fresh in memory. The auditor can read the book daily. He can note the weakness in his fingertips. The auditor can retain the data in his memory for a longer period.
He can ask the management to clear the doubtful points before preparing an audit report.
Reference
The audit notebook is useful for reference.
In the future, it can provide information to the audit staff. The past data gives an insight into business matters. The auditor can note the changes.
He can form an opinion about the changes in the nature and size of the business.
New Auditor
The audit notebook is useful for a new auditor. They can see the weakness of previous years. The old weak points may not be repeated this year.
Court Cases
The audit notebook helps defend an auditor in court cases. The people can go to the court of law to fix liability for the negligence of duty. The audit notebook is written proof of work performed by an auditor.