Holding an audit clearance meeting
Why firms hold a clearance meeting with management or the board at the end of an audit, what the agenda should cover, who attends and what to minute.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
The last week of an audit is when misunderstandings are most expensive. The partner thinks the client agreed to the inventory write-down; the client thinks it was still under discussion. The directors expected a clean report and have not heard about the emphasis paragraph. The representation letter arrives unsigned because nobody explained what it says.
A clearance meeting exists to prevent that. It brings the firm and the client's decision-makers into one room before the report is signed, to agree what has been found, what will change and what the report will say. This article covers whether you need one, an agenda that works, who should attend and what to record.
Not required, but widely used
ACCA's article on completing the audit is clear that an audit clearance meeting between the auditor and management, or those charged with governance, is not a requirement of the ISAs. It is nonetheless often held, to make sure there are no misunderstandings about the financial statements and the auditor's report.
The meeting is a tool, not a deliverable. Some of what it covers is required elsewhere:
- ISA 450, as ACCA quotes it, requires the auditor to communicate all accumulated misstatements to the appropriate level of management on a timely basis and request their correction.
- ACCA explains that matters to be communicated with those charged with governance under ISA 260 include significant findings from the audit and matters relating to the auditor's independence, and that the auditor must consider whether two-way communication has been adequate for an effective audit.
- ISA 450 also requires a written representation on uncorrected misstatements, with a summary of them attached, as ACCA explains.
A clearance meeting is often the most efficient way to do all three with the same people at the same time. For small owner-managed companies, where management and those charged with governance are the same two or three directors, it can be the main formal communication of the year. Our article on communicating with those charged with governance covers the required content in more detail.
A typical agenda
ACCA lists the matters usually discussed: proposed adjustments, difficulties encountered during the audit, written representations and the appropriateness of accounting policies. A workable agenda builds on that:
- Status of the audit. What is complete, what is outstanding, and the expected signing date.
- Proposed adjustments. The schedule of corrected and uncorrected misstatements, with management's decision on each.
- Accounting policies and judgements. Estimates, new or changed policies, and any area where the firm challenged management's view.
- Difficulties encountered. Delays in information, access problems, disagreements, and what resolved them.
- The draft auditor's report. The type of opinion, and any key audit matters, emphasis or other matter paragraphs.
- Written representations. What management is being asked to confirm, and why.
- Independence. Any matters the firm needs to bring to the board's attention.
- Internal control findings. The main points that will appear in the management letter.
- Next steps and dates.
Send the agenda and supporting schedules a few days before. Nobody makes good decisions about an adjustment they first saw on the table.
Who should attend
From the client: whoever approves the financial statements and has authority to correct them. For a company with a board, that usually means the finance director and either the chair of the audit committee or a non-executive director. For an owner-managed business, the owner-directors. The bookkeeper or financial accountant is useful for detail but should not be the only person present.
From the firm: the engagement partner and the manager. The senior who did the work on contentious areas can attend for those items. Where there has been a technical consultation on a significant matter, the partner should be ready to explain its outcome.
Booking it against the engagement in Achekam
Achekam lets staff create meetings linked to a client or an engagement and invite colleagues, so the clearance meeting sits on the engagement's calendar alongside the rest of the work. If the client is on a restricted access list, the meeting shows only as "busy" to people who are not on that list. Meetings are not deleted; they are cancelled with a reason, so a moved meeting leaves a trail.
Sharing the draft report beforehand
The draft report is the item most likely to surprise directors. Before the meeting, the partner can send the client a read-and-comment preview link to the audit report from Achekam. The client opens it without signing in; the link expires and can be revoked. Directors arrive having read the opinion and any extra paragraphs, and the meeting time goes on questions rather than first reactions.
Make clear in the covering note that the preview is a draft for discussion, that the wording may change, and that it must not be shared outside the board.
Minutes and follow-ups for the file
The clearance meeting's value to the audit file is the record. Minute:
- who attended, and the date;
- each proposed adjustment and management's decision, with reasons for any left uncorrected;
- judgements discussed and the conclusion reached;
- matters raised by the client and how the firm responded;
- the agreed timetable for signing and for the representation letter;
- open items, each with an owner and a date.
Send the minutes to the client for agreement, and file the agreed version. Where the meeting settles the uncorrected misstatements, use the same schedule as the attachment to the representation letter; our guide to written representations covers that letter.
ACCA's article on completing the audit sets out the clearance meeting alongside the other completion procedures, including subsequent events and written representations.
If your firm holds clearance meetings only on larger audits, try one on your next owner-managed engagement. A short meeting with the directors before signing usually takes less time than the e-mails that follow without one.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
