An Audit Note Book is a book which is maintained by the audit clerk. During the course of audit, the clerk comes across several difficulties or new points which he has to discuss with his senior or the auditor. He makes several inquires which, he thinks. have not been satisfactorily answered. Lest he might forget these points, he noted down these in a book which is called by different names such as Audit Note Book or Audit Memoranda. Such a book is a written record of queries made, replies received thereto, correspondence entered into, etc. this book may be of great help to the auditor preparing his Audit report from such a record. A separate Audit Note Book is maintained for each concern.
Contents of an Audit Note Book
Some of the points which are noted down in an Audit Note Book are given below:
- A list of books of account maintained by the client;
- The names of the principal officers, their powers, duties and responsibilities;
- The technical terms used in the business;
- The points which require further explanation andclarification;
- The particular of the missing vouchers, the duplicates of which have to be obtained;
- The mistakes and errors discovered;
- Totals or balances of certain books of account, Bank Reconciliation statement;
- Notes and queries which might be required at a subsequent audit;
- The points which have to be incorporated in the Audit Report;
- Any matter which requires discussion with the senior or with the auditor;
- Accounting method followed in the business;
- Dates of and completion of the audit;
- Previsions in the Articles and Memorandum of Association affecting the accents and audit.
The following is an example of notes made in the Audit Note Book: 28-8-1995 Entry in Cash Book Folio 63 for Rs. 500 wrongly debited to Freehold Land and Building instead of Leasehold Improvement Accountant advised.
29-8-1995 Receipt for Rs. 1,000 paid to Messrs. XYZ vide c.B. Folio 69. Not available.
2-09-1995 Receipt for Rs. 1,000 paid to Messrs. XYZ, seen and cancelled.
Value of an Audit Note Book
If notes have been properly made in the Audit Note Book, it might prove of great value to the auditor latter on, in case a suit is filed against him Audit Note Book will be a documentary evidence in favour of the auditor even after several years by which time the auditor might have forgotten everything about that particular audit. The importance of such a Note Book was emphasized by Lord (then Mr.) Justice Vaughan Williams in the London and General Bank case. Similarly the Audit Note which contained detailed information was of great assistance to the auditor in the case of the City Equitable Fire Insurance Company.
Such a book should be clear, concise and complete so that it may be quite intelligible to the clerk who audits the accounts of the same concern next year. In fact it would be aguide to such a clerk.