Jun 15, 2016
Ann M. Cole CPA
Now that fieldwork is complete and the auditors have returned to their office, the reporting process can begin. It is not unusual for an audit firm to write a draft of the businesses financial statements to be reviewed and approved by the business’ management.
Depending on the size and type of the entity being audited, a report draft will usually take a week or more to complete. Management of the business should expect to draft certain parts of the financial statements themselves even if the auditor is drafting the financial statements; for example, management’s discussion and analysis, allocation worksheets for certain expenses or departments, or other items that may be required for the notes to the financial statements. If the audit firm or the business completes the draft of the financial statements, there will be a certain flow to the completion of the audit report.
The draft report will be reviewed by an appropriate person in the audit firm, often a senior manager, audit director or partner. Once the initial review is complete, a draft of the report will be sent to the business for its review and approval of the final draft of the financial statements. Depending on the size of the business, this review process could also take a week or more to complete.
If management or the audit firm reviewers have changes, those changes will need to be made to arrive at the final draft. Once a final draft is approved by both the auditors and the business management personnel a final quality control review at the audit firm will be made to ensure the audit report and financial statements comply with audit reporting standards. After this final review is completed and appropriate management representations are received, the audit will be finalized and issued.
Throughout the entire audit process the most important consideration is the level of communication with your auditor and being part of the process. Businesses must remember that this is their audit too, and while it may not seem that way during the process, the audit report is a document that belongs to management with only an appropriate opinion rendered by the auditor. This means that strong communication with your auditor during all stages of the audit process will give you the best results.