Audit monitoring of ICAEW audit registered firms

Quality Assurance monitoring – updated May 2021

From 1 September 2021, we will return to our pre-COVID-19 review practices, including onsite reviews. When our scheduling team contacts you to confirm the review date, they will tell you whether the review will be onsite or desk-based. If an onsite visit is not possible because you have not yet returned to your office, our scheduling team will discuss whether we can carry out a remote visit instead.

Until 1 September, it might be possible to have an onsite review. You can discuss that with our scheduling team or the reviewer when they call you before the review.

Oversight of our monitoring work: Our monitoring work is supervised by oversight regulators; the Financial Reporting Council (FRC) for audit; the Insolvency Service for insolvency; the Legal Services Board (LSB) for probate; and the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) for AML.

We agree the number of monitoring reviews and the types of firms we need review annually with each oversight regulator.

If you have any questions about your review, please contact QADvisits@icaew.com

Regulatory role of ICAEW

Who will monitor our firm?

The Financial Reporting Council (FRC) monitors the audit of Public Interest Entities ((PIEs) a fully listed company, bank, or an insurance provider) and the procedures relating to these engagements. ICAEW is responsible for monitoring all other audit work in our firms, from the Big Four firms to sole practitioners. We also carry out monitoring visits to firms registered under the Crown Dependencies recognised auditor oversight regime.

Audit monitoring reports: inspect the results

Every year our quality assurance team 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. Audit Monitoring Report 2019 Audit Monitoring Report 2018 Audit Monitoring 2018 overview Previous Audit Monitoring Reports

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, all of who are 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.

Our work is subject to oversight inspections by the FRC and IAASA and also subject to a number of internal quality assurance processes.

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.

Prior to the implementation of the new Audit Regulation & Directive (ARD) regime on 17 June 2016, many firms received an ICAEW monitoring visit every three years (if your firm had any ‘major audits’ in FRC scope or other AIM / ISDX companies) or once every six years.

The ARD, and the FRC in delegating activities to ICAEW as an RSB, make it clear that RSBs should now use a risk-based approach to selecting the dates for firm visits. RSBs should no longer automatically default to six years between visits. There are various factors which determine your next visit date including;

• 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, but this is not an automatic default or right under the ARD. You may find we visit you more frequently. 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. Please refer to our leaflet: Your Practice Assurance visit for more information.

Firms with PIEs and retained 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 a market cap over €200m (average over 3 years) and Lloyd’s syndicates.

These together with PIEs are called retained audits. Firms with at least one large PIE audit will be visited by FRC’s AQR team every three years but for other firms these visits will extend to every six years. AQR visits will cover both the firm’s overall quality control procedures for the audit of PIEs and the 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.

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 and the latest Brexit advice.

• Find out more

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.