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Quality assurance monitoring of ICAEW audit firms

We are the largest recognised supervisory body in the UK, with around 2,300 firms registered for audit. Our philosophy is to be a robust, proportionate and transparent regulator. At the same time, we offer help and support to our firms where appropriate.

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Introduction

We are the largest recognised supervisory body in the UK, with around 2,300 firms registered for audit. Our philosophy is to be a robust, proportionate, and transparent regulator. At the same time, we offer help and support to our firms where appropriate. Further information about our audit monitoring visit process is available below.

Our approach to audit monitoring

We conduct monitoring visits to firms registered for audit with ICAEW. As well as our important role of protecting the public interest, we recognise the challenges that firms face and understand you may sometimes need help. We believe we are successful in fulfilling both objectives.

We have an experienced team of reviewers, who are all chartered accountants. As well as keeping up to date with the latest technical developments and interpretations of standards, we provide regular training to all our reviewers to continue to embed our philosophy to be proportionate and focus on the most significant aspects of the audit, and to help to ensure a consistent approach across our team.

Risk alert for new audit tenders

As ICAEW registered auditors will be aware, in response to changes in the audit market, the growth of challenger firms and some more complex audits moving away from the largest audit firms, we have increased our activities to monitor the audits undertaken across firms registered for audit with ICAEW. Our monitoring of auditor cessations and other recent intelligence information shows that there are significant numbers of UK companies seeking new auditors.

Your audit monitoring visit

During your visit, we will review and assess your firm’s procedures, processes and controls to make sure:

  • audits comply with professional standards; and
  • your firm meets the requirements of the audit regulations.

We use a risk-based approach to selecting the dates for firm visits. This is in line with the Audit Regulation & Directive regime and the requirements of our oversight body, the FRC. There are various factors which determine the risk profile of your firm and therefore your next visit date. These include:

  • the size and complexity of the firm;
  • its RSB-scope audit clients; and
  • previous regulatory history.

You may have your next visit on or just before the six-year anniversary of your previous visit, or we may need to visit more frequently due to your risk profile. We will continue to notify you when we select you for a visit.

Usually, we carry out our audit visits separately from visits for Practice Assurance, DPB (Investment Business) and probate. However, in some cases, it's more practical to cover more than one area.

The monitoring process if your firm carries out PIE audits

Since 17 June 2016, any firm which audits at least one PIE (a fully listed company, bank, or an insurance provider) is monitored by the FRC. The FRC also monitors audits of AIM quoted entities with market capitalisation over €200m (average over 3 years) and Lloyd’s syndicates.

These together with PIEs are called retained audits. Audit Quality Review (AQR) visits will cover the whole firm and overall quality control procedures and review of a sample of PIE/retained audits. The FRC will advise firms when a visit is due to take place.

We will continue to visit your firm if you have PIEs or other retained audits to review all other audit work. We may need to review some aspects of your whole-firm procedures to complete our visits.

The visit process

 
Our risk-based framework – visit cycles
  • Risk-based approach to visiting our registered audit firms.
  • Visits all firms at least every six years as a minimum.
  • More frequent visits to larger firms with significant audit client bases, either every year or every three to four years depending on the size of the firm.
  • Revisits to firms within three to four years if they required some follow-up action for weaknesses in audit work at the previous visit (‘risk’ visits)
Risk visits: while such firms will have been required to submit evidence of improvement, our experience tells us that those firms can slip back, therefore seeing them again sooner rather than later is the best way to ensure they stay on track.
Scope of our visits – summary
  • Assessment of whole-firm procedures, except for firms in FRC scope because they have audits of PIEs or other Retained Audits.
  • Detailed review of a sample of audit files, excluding audits in FRC remit.
  • Onsite visits to all firms, but desktop review and telephone interview for firms with no audits.
Assessing whole-firm procedures
  • Review of policies and procedures covering the key requirements of the Audit Regulations and ISQC1.
  • Focus on audit compliance review process, arrangements for maintaining competence and meeting the requirements of International Education Standard 8 (including review of CPD records for a sample of individuals) and compliance with ethical standards.
Review of audit files
  • Selection of audit files for review based on risk. Number of files varies according to the size of the firm, number and mix of audits and number of Responsible Individuals (RIs).
  • Reviewers use their experience and judgement to select the most appropriate areas for in-depth review. Focus on quality of audit evidence in risk areas and support for key judgements.
  • Queries discussed directly with the relevant RIs. Discussion is key to reaching a fair assessment. Firms given a complete trail to show how we arrive at our conclusions on each point.
Concluding and reporting
  • Findings summarised for closing meeting. Balanced summary provided, significant points clearly signposted.
  • Firms required to provide results of root cause analysis for any significant findings, together with details of actions.
  • Assess whether firm has commitment and ability to address issues and form overall conclusion.
  • Close visit if no further action needed, request additional information/confirmations if appropriate.
  • If serious concerns, report to ARC to consider regulatory action. Firms have the opportunity to comment on the report before it goes to ARC.

Audit Monitoring Reports

Every year our Quality Assurance team (QAD) looks back at the results of the last 12 months of audit monitoring reviews, covering the Big 4 to sole practitioners, and identifies areas for improvement and examples of good practice. We recommend you familiarise yourself with our latest report to help you stay up to date with best practice advice and current common issues.

Support for ICAEW audit firms

We offer practical audit support and guidance to ICAEW auditors including the latest regulatory updates in Audit News, reports and webinars to help your firm prepare your next audit monitoring visit.

Audit monitoring FAQs

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