Question

Why does the auditor refrain from incorporating the contents of the permanent file into the current year's audit file?

a) To avoid redundancy and keep the current year's audit file focused on the specific period under examination.
b) Due to legal restrictions on the inclusion of historical information in current audit documentation.
c) To minimize storage space requirements and maintain an organized record-keeping system.
d) Because the permanent file is considered irrelevant to the current audit and may introduce bias in the examination process.

Answer 1

Auditors avoid including the permanent file's contents in the current year's audit file to prevent redundancy and maintain a focus on the period being audited, which aids in creating an organized and efficient record-keeping system.

Step-by-step explanation:

The auditor refrains from incorporating the contents of the permanent file into the current year's audit file primarily to avoid redundancy and keep the current year's audit file focused on the specific period under examination. The permanent file contains information that is of continuing audit significance and is relevant to multiple accounting periods, such as articles of incorporation, important contracts, and information about the company's internal control structure. By keeping the permanent file separate, auditors can more efficiently review data pertinent to the particular period they are auditing without sifting through irrelevant or redundant historical data. This practice also helps to maintain a streamlined and organized record-keeping system which is crucial for the integrity and efficiency of the auditing process.