Audit observations are the findings and recommendations that result from an audit engagement. Audit observations should be first communicated with the auditee during fieldwork, which is the stage of the audit process where the auditor collects and analyzes evidence to evaluate the audit objectives1. Communicating audit observations during fieldwork has several benefits, such as2:
It allows the auditor to verify the accuracy and completeness of the observations, and to obtain additional information or clarification from the auditee if needed.
It enables the auditor to discuss the root causes, impacts, and risks of the observations, and to solicit the auditee’s input on possible corrective actions and implementation timelines.
It helps to build rapport and trust between the auditor and the auditee, and to avoid surprises or disagreements at the end of the audit.
It facilitates timely resolution of audit observations, and reduces the risk of audit delays or disputes.
Therefore, option B is the correct answer.
Option A is not correct because communicating audit observations when drafting the report is too late, as it may lead to misunderstandings, conflicts, or revisions that could have been avoided if the observations were communicated earlier. Option C is not correct because communicating audit observations at the end of fieldwork is also not ideal, as it may not leave enough time for the auditor and the auditee to discuss and agree on the observations and recommendations. Option D is not correct because communicating audit observations within the audit report is the final step of the audit process, not the first.
References:
Audit Process Overview1
Communicating Internal Audit Findings: Best Practices for Success2
