Document, document, document.

• Author: Schultz, Harold S.
• Position: Loud & Clear

With the passage of recent legislation, California Business & Professions Code Sec. 5097-8, that was effective Jan. 1, 2003, the California Board of Accountancy adopted corresponding regulations that became effective Jan. 23, 2004. All practicing CPAs should be aware the impact that these new regulations will have not only on their audit practice, but on their entire practice as well.

WHAT ARE WORKING PAPERS?

While the new regulations became effective January 2004, "working papers" as currently defined were in the regulations as early as 1996. Working papers represent the work performed, the information obtained and the pertinent conclusions reached in an audit, review, compilation, tax, special report or other engagement. They may take many forms including handwritten notes, typewritten notes, photocopies or computer databases.

Prior to recent legislation, there was a requirement that licensees adopt reasonable procedures for the safe custody of working papers. The requirement to develop and retain working papers is not new to the California licensee.

The recent legislation, California B&P Code Sec. 5097(b), adds a working paper requirement taken from Government Auditing Standards--the Yellow Book--published by the Government Accountability Office: "The audit documentation must be sufficient to enable a reviewer with relevant knowledge and experience, having no previous contact with the audit engagement, to understand the work performed and the conclusions reached."

The CBA regulations, Rule 68.3(d), add a working paper requirement taken from the U.S. Securities and Exchange Commission's regulations that require documentation regarding significant matters to be retained even if it is inconsistent with the auditor's final conclusions.

WHAT ARE THE IMPORTANT DATES?

The new regulations identify two important dates for audit record-keeping purposes. The first, the report date, represents the date that many CPAs recognize as the date the field work was completed. The second, which represents a new term for the profession, is the document completion date. The document completion date represents the date by which the CPA must complete all of the documentation associated with the audit engagement.

For California purposes, there is a 60-day period after the report issuance date where additions to the documentation of work previously performed is acceptable.

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Documentation cannot be deleted from the working papers after the...