What is the process of ‘engagement wrap-up’? Why is it important?

Answer:

The process of engagement wrap-up involves the auditor finalising an open items before issuing their audit report. The finalisation process could include completing additional audit procedures to ensure that sufficient and appropriate evidence is held on which to base the audit opinion. The process usually includes work in the following areas:

1. Review planned audit procedures for proper and complete execution.
2. Determine that all necessary matters have been appropriately considered.
3. Revisit open review notes, ‘to-do’ items and any audit procedures not yet completed. The auditor determines if any additional work is needed or the matter is no longer relevant.
4. Determine that all unnecessary documentation, drafts and review notes have been removed from engagement files. In some cases, the auditor notes that the item is no longer required and the reason, in other cases the item is removed along with any references to it.
5. For multi-location engagements, determine that all documents requested from other audit teams have been obtained and reviewed.
6. Remove all documents from the working papers that do not provide audit evidence supporting the auditor’s conclusions.
7. Consider the amount used for materiality. In some cases, revise the amount used for materiality when evaluating audit misstatements. Consider if additional procedures are required to support the changed materiality.
8. Reconsider the assessments of internal control at the entity level and the risk of fraud. Their conclusions about the effectiveness of internal control could be affected by control exceptions found during testing. Consider whether any material misstatements indicate fraud.
9. Revisit planning documentation to determine that all significant issues identified during the planning phase have been addressed.
10. Perform subsequent events procedures.

The engagement-wrap up process is important because it ensures that the auditor considers all matters that are relevant to finalising the documentation on the audit and ensuring enough evidence is held to support the audit opinion.