May 14, 2022/ Steven Bragg
A permanent file is a set of records that serves as an ongoing reference for an organization's external auditors. The information in the file is intended to be accessed repeatedly in successive audits to assist the audit team in the conduct of their tasks. The file may contain the following documents: Accounting policies Articles of incorporation Bylaws Chart of accounts Director list History of the client organization Internal controls documentation Organization chart Prior year's audit reportWhat is a Permanent File?
Content of permanent audit file : [a] Copy of initial appointment letter if the engagement is of recurring nature. [b] Record of communication with the retiring auditor, if any, before acceptance of the appointment as auditor. [c] NOC from previous auditor. [d] Information concerning the legal and organisational structure of the entity. In the case of a company, this includes the Memorandum and
Articles of Association. In the case of a statutory corporation, this includes the Act and Regulations under which the corporation functions, i.e. [i] In case of partnerships- Partnership deed. [ii] In case of trusts- Trust deed. [iii] In case of societies- Certificate of registration/ Rules and Bye-laws.
[e] Organisational structure of the client.
[f] List of governing body including Name, Address and contact details. For instance, the list of directors
in case
of a company, list of partners in a partnership and list of trustees in a trust.
[g] Extracts or copies of important legal documents, agreements and minutes relevant to the audit.
[h] A record of the study and evaluation of the internal controls related to the accounting system. This might be in the form of narrative descriptions, questionnaires or flow charts, or some combination thereof.
[i] Copies of audited financial statements for previous years
[j] Analysis of significant ratios and trends
[k] Copies of management letters issued by the auditor, if any.
[l] Notes regarding significant accounting policies.
[m] Significant audit observations of earlier years.
[n] Assessment of risks and risk management
[o] Major policies related to Purchases and Sales
[p] Details of sister concerns
[q] Details of Bankers, Registrars, Lawyers etc
[r] Systems and Data Security policies
[s] Business Continuity Plans
In the case of recurring audits, some working paper files may be classified as permanent audit files which are updated currently with information of continuing importance to succeeding audit, as distinct from current audit files which contain information relating primarily to the audit of a single period.
A permanent audit file normally includes :
- Information concerning the legal and organizational structure of the entity. In the case of a company, this includes the Memorandum and Articles of Association. In the case of a statutory corporation, this includes the Act and Regulations under which the corporation functions.
- Extracts or copies of important legal documents, agreements and minutes relevant to the audit.
- A record of the study and the evaluation of the internal controls related to the accounting system. This might be in the form of narrative descriptions,questionnaires or flow charts, or some combination thereof.
- Copies of audited financial statements for previous years.
- Analysis of significant ratios and trends.
- Copies of management letters issued by the auditor, if any. Record of communication with the retiring auditor, if any, before acceptance of the appointment as auditor.
- Notes regarding significant accounting policies.
- Significant audit observations of earlier years.
The current file normally includes :
- Correspondence relating to acceptance of annual reappointment.
- Extracts of important matters in the minutes of Board Meetings and General Meetings as relevant to audit.
- Evidence of the planning process of the audit and audit programme.
- Analysis of transactions and balances.
- A record of the nature, timing and extent of auditing procedures performed, and the results of such procedures.
- Evidence that the work performed by assistants was supervised and reviewed.
- Copies of communication with other auditors, experts and other third parties.
- Letters of representation or confirmation received from the client.
- Conclusions reached by the auditor concerning significant aspects of the audit, including the manner in which exceptions and unusual matters, if any, disclosed by the auditor’s procedures were resolved or treated.
- Copies of the financial information being reported on and the related audit reports.