Ownership of Audit Working Papers

Ownership of Audit Working Papers: Who owns them?

Audit working papers and their ownership:

Are working papers of an audit owned by the auditor? Or do they belong to the property of the client? This blog throws light on this issue. But before that, let us see the meaning of audit working papers.  

What are “Working Papers” and why are they important?

Audit working papers refer to the documentation of the planning and execution of an audit engagement. They are essentially a record of audit procedures performed by the auditor while auditing his client’s books, relevant audit evidence obtained, and the conclusions reached by him. They may include information such as details of the audit program, analyses, summaries of significant matters, letters of confirmation and representation, checklists, risk assessments, etc.

It is very important that an auditor should maintain proper working papers to demonstrate the audit work. The purpose of the working papers is to demonstrate that the audit is and has been conducted in adherence to the basic principles. The working papers include the documents prepared or obtained by the auditor and retained by him in connection to the audit. They include all evidence gathered by the auditor that work has been performed in conformity with relevant auditing standards.

Further, the audit working papers prepared for a client and its audit engagement are usually detailed enough for another auditor, who is adequately experienced and competent but unfamiliar with the client, to obtain an overall understanding of the engagement.

Controversy over the ownership and custody of working papers

The auditor has always been regarded as the proper and rightful custodian of audit working papers. However, in the past, there have been some differences of opinion over the question of ownership and custody of audit working papers.

One view says that the client should be the owner of working papers since they contain information about the client’s entity and are thus confidential. Working papers are derived from the information contained in the client’s set of books.

Another view says that the auditor should be the owner of working papers since they contain information that is collected and evaluated during the course of an audit. The auditor runs several tests on the client’s records to gather sufficient and appropriate audit evidence and records the details of his audit program as well as observations in the working papers. Hence, he prepares working papers so as to discharge his duties as an auditor. Furthermore, where an auditor is charged with negligence, working papers prove to be of immense value to him and can be used as evidence to counter allegations.

However, with the help of court decisions and professional pronouncements, this controversy between the two views has been well settled now. The claim of auditors over working papers has been given acceptance over that of clients.

The legal perspective on “Who owns Audit Working Papers?”

In the case of Sockockinsky Vs Bright Grahame & Co. (England 1938), it was decided that all types of working papers are owned by the auditor because the auditor works in the capacity of an independent contractor and not as an agent of the client.

In another case law of Chantrey Martin & Co v Martin [1953] 2 QB 286 concerning the question of ownership of working papers, a clear line of distinction was drawn between two scenarios, i.e., when the firm of accountants works as an independent and professional auditor and when it works as an agent to the client. It was decided that when professional accountants work in the capacity of an agent to their clients, for example, for corresponding with tax authorities on behalf of the client, the working papers that are brought into existence are the property of the client. Conversely, when accountants are appointed as independent auditors, all working papers prepared or obtained by them are their property and not the property of the client. All schedules prepared by the audit staff, draft accounts, checklists, and workings done by the auditor to express an opinion on the state of affairs/Balance Sheet are owned by the auditor himself.   

Hence, from the above legal cases, it is clear that audit working papers belong to the auditor and his firm.

The professional perspective on “Who owns Audit Working Papers”?

The professional pronouncements of regulatory bodies of accountants & auditors all over the world took a similar view to that taken in court decisions. In India too, the Institute of Chartered Accountants of India (ICAI) has issued SA 230: “Audit Documentation” to discuss the issues relating to – what are the auditor’s responsibilities for documentation and who owns the audit working papers. The following points can be drawn on the basis of the Standard:

For ownership of audit working papers:

The ownership of audit working papers belongs to the auditor. However, at his discretion, he can make some extracts or copies of such papers available to the client.

The property rights of the auditor are subject to limitations contained in Clause 1, Part I of Second Schedule to the Chartered Accountants, 1949. Here, the auditor is prohibited from disclosing any confidential information of the client without obtaining management’s approval, except when required by law. Hence, he should refrain from sharing audit working papers with a third party as they are based on the client’s accounting data.

For retention of audit working papers:

There are no explicit rules as regards the retention of audit working papers. These working papers need to be kept in safe custody by the auditor and in a confidential manner for such time as may be necessary to meet the requirements of his practice (i.e., to service the client) or to satisfy any legal or professional requirement related to record retention.

However, the Standard on Quality Control (SQC – 1) requires that working papers must be retained by the auditor for at least 7 years from the date of issue of the auditor’s report.

Conclusion: “Working papers are the property of the auditor”.

From the above discussion, it is clear that working papers are owned by the auditor, even though they comprise information that is based on the client’s records. The auditor may, at his discretion, disclose extracts or copies of working papers to the client. And as far as retention is concerned, the auditor must retain the papers as long as he deems fit or to meet the requirements of the law (if any) in this regard.


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