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First line of defence

Reasons for a cold file review range from regulatory requirements, through higher-risk jobs, to pre-planning for the next year, but they can also help audit firms identify where they can improve efficiency.

Although they take place after the event, cold file reviews of completed audit engagements have a key role to play in effective self-regulation. And, while there may be a number of reasons for conducting one, its purpose is to confirm that the registered auditor carried out the audit in accordance with the International Standards on Auditing (UK and Ireland), Ethical Standards for Auditors, any specific legislative requirements and the requirements of the Audit Regulations (see below); and that the accounts comply with statutory and other requirements.

Clarified International Standard on Quality Control (ISQC) 1 requires firms to have certain policies and procedures in relation to engagement performance and to follow them. So a cold file review should identify whether the audit work has been carried out in accordance with the firm’s adopted procedures and to the firm’s required professional standards, and highlight any major areas of weakness or non-compliance.