What are working papers?

Working papers are the detailed documentation supporting financial statements and tax returns, including reconciliations, calculations, analyses, and source documents that provide evidence for reported amounts. For professional service firms, working papers support financial statement accuracy and satisfy auditor or IRS inquiries.

Key characteristics

• Documentation of work performed

• Supports reported amounts

• Includes reconciliations

• Contains calculations

• Satisfies audit inquiries

• Should be organized and retained

Why it matters for professional service firms

Working papers prove how numbers were determined. Without them, you cannot explain or defend financial statements. Professional service firms should maintain organized working papers for all significant accounts and calculations.

Real-world example

Kevin's accountant prepared year-end working papers: bank reconciliations for all accounts, AR aging tied to GL, fixed asset schedule with depreciation calculations, accrual calculations with support, and tax provision computation. When the bank requested financial statement support, working papers documented every significant balance. Organized papers enabled a quick response.