Post-Fieldwork Considerations for Audits

There are essentially three stages to every audit – planning/pre-fieldwork, fieldwork, and post-fieldwork/wrap-up. In order for an audit to run smoothly and efficiently, all three phases need to be executed well. In this article, we will discuss the post-fieldwork aspects of an audit.

Communication

One of the most critical aspects of the post-fieldwork phase of the audit is the communications with management. Typically, once fieldwork has ended, the draft reports can be prepared for review by management. This process also includes reviewing the final audit adjustments with management and ensuring the client’s books are in agreement with the audited figures. Additionally, and equally as important, is a review of the draft management letter (SAS115) comments. It is important these be reviewed with management for several reasons, including the fact that this allows management the opportunity to develop its response to the comment. In addition, it provides a final opportunity for the auditor to ensure s/he has a full and complete understanding of the issues presented.

Current audit standards also require the auditor communicate certain items to “those charged with governance,” which typically is either the board of directors, finance committee, or audit committee. Statement on Auditing Standards No. 114 (SAS114) discusses the required communication and specifies what must be communicated. Additionally, it is best practice in the industry that these communications be made in writing.

In addition to the communications required under SAS114, SAS115 requires the auditor communicate all material weaknesses and significant deficiencies to those charged with governance. Due to the fact that this group is charged with oversight of the nonprofit, it is critical the SAS115 comments be discussed with them and that they are able to develop an in-depth understanding of the issue and the recommended solution.

Lastly, it has become best practice for this group to hold an executive session with the auditor. In this session, all client staff will leave the meeting, thus providing an opportunity for the auditor and those charged with governance to talk more freely. In this session, the group should ask the auditor any questions they may have felt uncomfortable asking with staff present. It can also be used as a time for the auditor to discuss any problems encountered during the audit.

Report Dating & Subsequent Events

Once the report has been approved by the client's board, or designated subcommittee, and is ready to be finalized, you need to determine the appropriate date for the audit opinion and other reports. In recent years, audit guidelines have changed regarding the dating of the audit report. Previously, the audit report was typically dated on the last day of fieldwork, which could be significantly earlier than the date the audit report was actually finalized. A consequence of this was the auditors’ subsequent event review only had to be extended through the final day of fieldwork. However, the revised standards stipulate the audit report be dated the day the report is available to be issued. This means all the necessary audit evidence has been obtained, including all external confirmations.

A final effect of the new report dating standards is the dating of the client representation letter. In past years this letter was typically dated the last day of fieldwork, however under the new standards this letter must also be dated the date the report is available to be released. This ensures the report and representation letter have the same date.

At first glance, this may seem like a technical change that would have minimal impact on the audit. However, due to the new dating requirements, the auditor is required to extend the subsequent events review through the date the report is ready to be released. Depending on the amount of time between the end of fieldwork and the report release date, this could involve extra time being required.

Conclusion

As you can see, the completion of fieldwork is not the completion of the audit but just a step in the completion of the overall audit process. In addition, you can see the importance of minimizing the time between the completion of fieldwork and the issuance of the audit report to the overall efficiency of the audit.