I tell my students that if they are ever called upon to defend one of their audits in court, the only evidence that will help them is the evidence documented in the workpapers. It helps if I can find one or two students who have completed internships to talk about how much time they spent writing, rewriting, and rewriting again detailed descriptions of the work they performed. Sadly, it is easy to find media accounts of auditors who have been caught altering and/or backdating audit workpapers.
“Advancing the Audit Documentation Standard,” Ray Whittington, Lynford Graham, Gretchen Fischbach & John Ahern, Journal of Accountancy (June 2006): 64-69. This article explains SAS No. 103’s requirement that audit documentation should be sufficiently detailed to give experienced auditors who were not involved in the audit a clear understanding of the work performed, the evidence obtained, and the conclusions reached.
Examples of Documentation Violations:
“PCAOB Disciplines Former E&Y Auditors,” Michael Cohn, AccountingToday.com (August 1, 2011). Three E&Y auditors were disciplined for altering and backdating audit workpapers in advance of a PCAOB inspection.
“SEC Suspends 3 Ex-Managers of KPMG Over Tenet Audit,” New York Times (March 31, 2006): C6. Three audit managers are disciplined for altering and backdating audit workpapers.
“NextCard Auditor Admits to Tampering,” Wall Street Journal (November 1, 2004): C3. A former Ernst & Young partner pleads guilty to altering workpapers to cover up deficiencies in audit of NextCard.
“Denver Accounting Firm Faces SEC Fine,” D. Milstead, Rocky Mountain News (July 13, 2004): B3. Auditors are charged with destroying documents and altering workpapers after the SEC began an investigation of client Sport-Haley.