Question

Working papers may properly include both factual data and expressions of opinion; however, the two should always be carefully distinguished. Thus, the statement, "We examined the petty cash vouchers for the month of July and found these documents to be poorly prepared and inadequately controlled," is an unsatisfactory mixture of fact and opinion. Explain.

Answer 1

According to Audit Evidence and Documentation

Working papers may properly include both factual data and expressions of opinion; however, the
two should always be carefully distinguished.Thus, the statement, "we examined the petty cash
vouchers for the month of July and found these documents to be poorly prepared and
inadequately controlled," is an unsatisfactory mixture of fact and opinion.

Because Deficiencies in the preparation of petty cash vouchers, such as omission of dates and signatures, should be presented as factual matters.

The auditors' opinion as to the adequacy of the internal control over petty cash is properly included in the working paper but should clearly be labeled as an expression of opinion.