auditqualitymatters

The objective of a hot file review is to ensure that the audit report to be issued is appropriate in the circumstances. ISQC requires that the auditor have policies setting out the criteria to be considered when determining what audit engagements require such review in addition to those for public interest entities. Criteria would normally include the relative size of fee, public interest, the nature of the engagement and unusual circumstances or risks.

The review process needs to be documented and does not reduce the responsibilities of the auditor. The audit report cannot be issued where there remain unresolved differences of opinion between the auditor and the engagement quality control reviewer.

Compass approach

A hot file review includes:

• An independent evaluation of the audit opinion expressed by the auditor on high risk clients.
• The review of one file selected by the auditor.
• The involvement of the auditor by expressing his views on the issues raised.
• A report recommending key matters to address before audit report is issued.
• Suggested manuals, checklists and appropriate audit programmes that may be introduced at the practice (at an extra charge if the implementation of these tools is onerous).

^{Renzo Farrugia is recognised by the Malta Institute of Accountants to provide audit support services.}