Audit notebook is a diary on which auditor scribble down all important inquiries to avoid the possibility of unquestioned material facts.
A notebook that is prepared by the audit staff to note down all the uncleared queries which he/she may find in the course of the audit and requires further clarification and explanation is known as an audit notebook.
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 which are to be incorporated in the report are noted down.
Contents of Audit Note Book
Some of the points which are noted down in an Audit Notebook are given below:
- 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 followed in the business.
Special Matters to be recorded in the Audit Note Book
- 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 attention of the auditor must be drawn, i.e. failure of the company 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 other 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 Note Book
Audit notebook helps the auditor to prepare an audit report. A separate audit notebook is maintained for each concern.
Some advantages of audit notebook are given below:
The audit notebook is helpful to 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.
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 his 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 on 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.
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.
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.
The audit notebook is helpful to 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 a proof of work performed by an auditor.