Hot and cold file reviews for high audit standards
File reviews can highlight opportunities to enhance audit quality and effectiveness, particularly when conducted by external reviewers and/or combined with root cause analysis. Auditors share insights and practical tips on how to get the most from them.
Hot and cold file reviews are important components in the infrastructure that exists to ensure the highest standards of audit quality by firms and regulators. Auditors who want to get more from them will benefit from considering Audit Quality Inspection Reports from the Financial Reporting Council (FRC) and their findings and annual audit monitoring reports from ICAEW’s Quality Assurance Department (QAD) and their findings (at ). After all, they cumulatively consider thousands of audit files in a single year – and there is strength in numbers.
ICAEW’s Audit Monitoring Report 2020 shares some common problems seen by QAD and ways to avoid these, or identify and address them, with the assistance of hot and cold file reviews and techniques such as root cause analysis (see Digging deep). “Effective cold reviews enable audit firms to identify areas where audit work could be improved on a timely basis,” says Trevor Smith, Director of QAD, while emphasising that a cold file review is not itself sufficient to right any wrongs. “We see firms that have very thorough reviews but fail to take appropriate actions to address the findings.”
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