A register or a set of notes that is maintained by the audit staff to record some important points observed, any errors, some doubtful queries, explanation, etc is known as an audit note. It also carries definite information regarding the day-to-day work that is executed by the audit clerks. In simple words, it usually records a large variety of matters that are observed during the course of the audit. It should be maintained systematically and clearly as it serves as authentic evidence in support of work that is done to protect the auditor against any legal charge.
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What Does an Audit Note Include?
The following matters are the content that is incorporated into an audit note.
- The first thing is the list of the account books that are normally used and maintained.
- Next come the names of the principal officers, their duties and responsibilities.
- Then it mentions the nature of the business that is being carried on and the important documents relating to the constitution of business.
- It also consists of the extracts of minutes and other contracts that affect the accounts along with the extracts of correspondence with the statutory authorities.
- It includes a copy of the audit program and accounting methods, internal control as well as an internal check system in operation.
- It involves some routine queries such as missing receipts and vouchers, etc and carries out the details of errors and frauds that are discovered during the audit.
- It states the points that are to be included in the audit report along with the details of all important information that is to be used as a reference for future audits.
- Lastly, it contains the date of commencement and the completion of the audit.
What are the Advantages of Audit Notes?
Makes the Audit Work Easy:
This facilitates the job of an auditor as all the important details about the audit are recorded in the notes which the audit clerk cannot recall everything all the time. It also helps in recalling and remembering the important matters that are related to the audit work.
Construction of the Audit Report:
An audit note also helps in providing some required data for the preparation of the audit report. An auditor must analyze the audit note before preparing and finalizing the audit report.
Works as a Documentary Evidence:
An audit note works as a piece of documentary evidence in the court of law in case a suit is filed against the auditor for his negligence.
In case an audit assistant is changed before the completion of audit work, the audit note works as a guide after the completion of the balance work. Besides, it also acts as a guide for carrying out the following audits.
Assessing the Work of Audit Staff:
A proper audit note helps in evaluating the work performed by the audit staff and helps in evaluating their level of efficiency.
An audit note also helps in fixing responsibility on the concerned clerk who is responsible for any undetected errors and some frauds in the course of the audit.
No Disruption of Audit Work:
An audit note includes all the important details about the audit. Therefore, any change in the audit staff will not disturb or disrupt the audit work.
What are the Disadvantages of Audit Notes?
It has been observed that the maintenance of the audit notes creates some misunderstanding between the client’s staff and the audit staff very often.
An audit note may lead to the development of a complaining or a fault-finding attitude in the minds of the staff.
Audit notes must be prepared with great caution as it serves as a piece of evidence in the court of law. If the audit note is prepared without due care it cannot be used as evidence against the auditor for negligence.
Any mistakes in the note may have adverse impacts on the next audit since the audit notes are used in performing subsequent audits.
Why is the Audit Note Important?
As an audit note is important because it is usually taken as a piece of reliable evidence even by the court of law in case any dispute occurs or if the auditor is charged with negligence. It is also useful for drawing audit programs.