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TECHNICAL ADVISORY SERVICES HELPSHEET

Cold file audit compliance review

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Published: 01 Sep 2013 Reviewed: 17 Apr 2019 Update History

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This helpsheet provides a checklist of matters to be addressed when conducting an audit compliance cold file review in accordance with the Audit Regulations and Guidance for Registered Auditors regulated by the ICAEW and the International Standard on Quality Control (UK & Ireland) (ISQC 1).

Introduction

This helpsheet has been issued by ICAEW’s Technical Advisory Service to provide a checklist of matters to be addressed when conducting an audit compliance cold file review in accordance with the Audit Regulations and Guidance for Registered Auditors regulated by the ICAEW and the International Standard on Quality Control (UK) (ISQC 1).

Members may find the checklist requires additions and amendments to address their firm’s particular circumstances and for listed company, regulated or specialist audits, or audits not conducted under the Companies Act.

This checklist is for use when conducting audit compliance cold file reviews in respect of audits which have applied the revised International Standards on Auditing (UK) (ISAs).

Members may also wish to refer to the following related helpsheet:

Requirement for cold file reviews

A Registered Auditor is required by Regulation 3.20 to monitor, at least once a year, how effectively it is complying with the Audit Regulations. The International Standard on Quality Control (UK) (ISQC 1) issued by the Financial Reporting Council (FRC) also requires a firm to monitor its policies and procedures relating to the system of quality control including a periodic inspection of a selection of completed engagements.

The annual compliance review is in two parts:

Cold file reviews are required every year for all firms

Cold file reviews are undertaken to ensure that the firm’s audit procedures, the FRC Ethical Standard (ES), the FRC International Standards on Auditing (ISAs) and the ICAEW Audit Regulations (Reg) have been complied with and that the accounts comply with all the appropriate disclosure requirements.

Cold file reviews should be conducted by persons with the appropriate expertise and authority (Reg 3.20). They should be done by someone independent of the audit team. Under ISQC1, the responsible individual and the engagement qualify control reviewer are not permitted to undertake the review.

Smaller firms may not have sufficient resource in-house to do independent reviews, and should therefore arrange for an external review at least every three years. However, the requirement to do cold file reviews every year still applies. Therefore such firms must still do a cold file review in the intervening two years, even if this is done by someone who was involved in the audit. If firms do not think they can do an effective review in-house, they should arrange an external review.

Where the reviewer is external to the practice, competence, independence, fit and proper status and confidentiality should be confirmed, preferably in writing. The scope of the review and reporting procedures to be adopted also need agreement. The reviewer’s liability, and an undertaking not to accept appointment for professional services in respect of clients reviewed, should also be considered (see Appendix 1). To protect the auditor against any claim of breaching client confidentiality, the client should be advised of external quality control reviews, normally within the engagement letter.

Once the review has been undertaken, the reviewer should consider the areas where issues of non-compliance have been identified and ensure that a suitable action plan has been agreed.

The results of the cold file review and the action plan should be communicated to those in the firm involved in the audit work.

Included in this helpsheet

  • Cold File Audit Compliance Review Checklist
  • Draft external reviewer declaration

Download the full helpsheet to access the documents:

If in doubt seek advice

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.

Terms and conditions

© ICAEW 2024  All rights reserved.

ICAEW cannot accept responsibility for any person acting or refraining to act as a result of any material contained in this helpsheet. This helpsheet is designed to alert members to an important issue of general application. It is not intended to be a definitive statement covering all aspects but is a brief comment on a specific point.

ICAEW members have permission to use and reproduce this helpsheet on the following conditions:

  • This permission is strictly limited to ICAEW members only who are using the helpsheet for guidance only.
  • The helpsheet is to be reproduced for personal, non-commercial use only and is not for re-distribution.

For further details members are invited to telephone the Technical Advisory Service T +44 (0)1908 248250. The Technical Advisory Service comprises the technical enquiries, ethics advice, anti-money laundering and fraud helplines. For further details visit icaew.com/tas.

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  • Update History
    01 Sep 2013 (12: 00 AM BST)
    First published
    17 Apr 2024 (12: 00 AM BST)
    Changelog created. Converted to new template. Links updated. Helpsheet has not had a full review
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