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.

B. At the end of fieldwork. Audit observations should be first communicated with the auditee at the end of fieldwork. This allows for a timely discussion of the findings and gives the auditee an opportunity to provide input or clarification before the final audit report is prepared. This communication fosters transparency and allows for the resolution of any misunderstandings or additional information needs.

During fieldwork, auditors may communicate preliminary observations or issues as they arise to facilitate immediate action or clarification. However, the formal communication of all audit observations, including any additional insights gained throughout the audit process, typically occurs at the end of fieldwork. This ensures that the auditee receives a comprehensive overview of the audit findings before finalizing the audit report. Answer will be B

Communicating audit findings at the end of fieldwork is also not ideal. It may not allow sufficient time for the auditor and auditee to discuss and agree on findings and recommendations.

A. during fieldwork. During fieldwork, auditors should communicate their observations to the auditee as they are identified. This allows for timely discussion, clarification, and resolution of issues, ensuring that corrective actions can be taken promptly if needed. Waiting until the end of fieldwork or until the audit report is drafted may delay addressing important issues and could potentially hinder the effectiveness of the audit process. Therefore, it is best practice to communicate audit observations to the auditee as they arise during fieldwork.