Audit

Audit finalisation and the final review

AUDIT
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Audit finalization and the final review

Introduction:

The audit finalisation and final review process is a critical phase in the audit lifecycle, serving as the culmination of all the procedures, analyses, and conclusions drawn throughout the audit engagement. This phase involves consolidating the audit findings, addressing any outstanding matters, and forming the auditor’s opinion on the financial statements. A thorough and well-executed final review ensures the accuracy, completeness, and fairness of the audit report, providing stakeholders with reliable and transparent financial information. This article aims to provide a comprehensive understanding of the audit finalisation and final review process, including the key steps, considerations, and best practices involved.

Objectives of the Final Review:

The primary objectives of the final review process are as follows:

Accuracy and Completeness:

To ensure that the audit findings, conclusions, and recommendations are accurate, complete, and supported by sufficient and appropriate audit evidence.

Fair Presentation:

To assess whether the financial statements, as a whole, present a true and fair view of the entity’s financial position, performance, and cash flows in accordance with the applicable financial reporting framework.

Compliance and Disclosure:

To verify that the financial statements comply with the relevant accounting standards, regulatory requirements, and disclosure obligations. This includes ensuring that all necessary disclosures are included in the financial statements.

Address Outstanding Matters:

To identify and resolve any outstanding issues, inquiries, or discrepancies that may impact the audit opinion or require further investigation.

Forming the Auditor’s Opinion:

To evaluate the overall results of the audit procedures and conclusions drawn to form the auditor’s opinion on the financial statements, which may be unqualified, qualified, or adverse.

Steps in the Final Review Process:

The final review process typically involves the following key steps:

Consolidate Audit Findings:

Gather and consolidate all the audit findings, analyses, and conclusions from the various audit procedures performed during the engagement. This includes reviewing workpapers, schedules, and supporting documentation.

Address Outstanding Matters:

Identify and address any outstanding matters, inquiries, or discrepancies that require further investigation or resolution. Collaborate with the audit team and client to obtain missing information, clarify uncertainties, or perform additional procedures as necessary.

Evaluate Overall Audit Results:

Assess the overall results of the audit procedures, considering the significance and impact of identified issues or adjustments. Evaluate whether the financial statements, as a whole, are free from material misstatement or contain material departures from the applicable financial reporting framework.

Form the Auditor’s Opinion:

Based on the evaluation of the audit results, form the auditor’s opinion on the financial statements. The opinion may be unqualified (clean opinion), qualified (modified opinion), or adverse, depending on the nature and significance of identified issues.

Draft the Audit Report:

Prepare a draft audit report that includes the auditor’s opinion, the scope of the audit work performed, key findings, and any necessary disclosures or qualifications. Ensure the report complies with relevant reporting standards and requirements.

Review and Finalise the Audit Report:

Conduct a thorough review of the draft audit report, ensuring accuracy, clarity, and completeness. Address any comments or suggestions from the audit team and client. Finalise the report, obtaining necessary approvals and signatures.

Communicate the Audit Results:

Present the final audit report and findings to the client’s management and those charged with governance. Discuss the key findings, recommendations, and any matters requiring further attention. Provide a clear understanding of the auditor’s opinion and its implications.

Considerations and Best Practices:

To ensure a comprehensive and effective final review process:

Professional Skepticism:

Maintain professional skepticism throughout the final review process. Challenge assumptions, seek corroborating evidence, and consider alternative explanations for findings.

Documentation and Audit Trail:

Ensure that all workpapers, schedules, and supporting documentation are properly organised, referenced, and retained. A well-documented audit trail enhances the reliability and defensibility of the audit findings.

Quality Control:

Implement quality control procedures to review the work performed, conclusions reached, and compliance with applicable standards. Consider engaging a second partner or reviewer to provide an independent perspective.

Timely Resolution of Outstanding Matters:

Address outstanding matters promptly to avoid delays in finalising the audit. Collaborate closely with the client to obtain necessary information or clarifications.

Consider Subsequent Events:

Stay alert for subsequent events or disclosures that may impact the financial statements or the auditor’s opinion. Ensure that the financial statements reflect the most current information.

Consistency and Comparability:

Ensure consistency in the application of accounting policies, disclosures, and presentation across periods. Evaluate whether the financial statements are comparable to prior periods, considering any changes in accounting policies or disclosures.

Communication and Transparency:

Foster open and transparent communication with the client throughout the final review process. Provide clear and concise explanations for audit findings, recommendations, and the basis for the auditor’s opinion.

Examples of Final Review Procedures:

Here are some examples of procedures performed during the final review:

Financial Statement Review:

Conduct a comprehensive review of the financial statements, including the income statement, balance sheet, cash flow statement, and disclosures. Ensure compliance with applicable financial reporting standards and consistency with prior periods.

Evaluation of Key Audit Findings:

Assess the significance and impact of identified issues or adjustments on the financial statements. Evaluate whether identified misstatements or departures are material and require adjustments or disclosures.

Analysis of Going Concern Assumptions:

Review management’s assessment of the entity’s ability to continue as a going concern. Evaluate the reasonableness of assumptions, key performance indicators, and management’s plans to address uncertainties.

Review of Compliance with Laws and Regulations:

Assess compliance with relevant laws, regulations, and contractual obligations. Evaluate whether the financial statements reflect the impact of non-compliance, if applicable.

Finalisation of Audit Opinion:

Based on the evaluation of audit findings and conclusions, determine the appropriate auditor’s opinion. Draft and review the opinion paragraph, ensuring it accurately reflects the audit results.

Conclusion and Recommendation:

The audit finalisation and final review process is a critical phase that ensures the accuracy, completeness, and fairness of the audit report. By diligently addressing outstanding matters, evaluating overall audit results, and forming the auditor’s opinion, auditors provide stakeholders with reliable and transparent financial information. A well-executed final review enhances the credibility and integrity of the audit process, contributing to the overall quality and reliability of financial reporting.

Enhancing the Final Review Process:

To further enhance the effectiveness and efficiency of the final review:

Standardise Review Procedures:

Develop standardised review checklists or protocols tailored to the specific engagement and industry. This ensures consistency and helps identify critical areas requiring further attention.

Leverage Technology:

Utilise audit management software and data analytics tools to streamline the final review process. These technologies can facilitate the identification of anomalies, trends, or discrepancies in the financial data.

Continuous Improvement:

Encourage a culture of continuous improvement by regularly reviewing and refining final review procedures. Incorporate lessons learned from past audits to enhance the effectiveness of future final reviews.

Final Thoughts:

The audit finalisation and final review process is a critical phase that culminates the auditor’s work and provides stakeholders with valuable insights. By diligently addressing outstanding matters, evaluating overall audit results, and forming a well-supported opinion, auditors contribute to the transparency and reliability of financial reporting. A robust final review process enhances the overall quality and integrity of the audit, fostering confidence among investors, creditors, and other users of the financial statements.