Hot and Cold File Review Process

As a consequence of an unsatisfactory quality assurance review, a firm may be required to engage in either the cold or hot file review process.

The following outlines the two processes, setting out the detail of the two processes.


Cold File Review

A cold file review requirement may arise as per Bye Law 7, Quality Assurance, section 7.17.3,
 
“the Director of Professional Standards and the Quality Assurance Manager or Practice Regulation Manager are appointed by the Council and are employees of the Institute. The Director of Professional Standards and the Quality Assurance Manager or Practice Regulation Manager have the following powers in relation to Quality Assurance reviews:
 
to order a Firm to have an externally conducted cold file review conducted by an appropriately qualified person or entity approved by the Institute specialising in the provision of cold file reviews of a specific file or files in advance of an audit opinion being signed by the auditor. A copy of the report of the cold file review must be furnished to the Institute on request;”
 
Where this is the case, this will be indicted in either the Quality Assurance report issued by the Quality Assurance Executive or by a follow on letter issued by the Practice Regulation Manager, the Quality Assurance Manager or the Director of Professional Standards.

A cold file review is a review conducted on a completed audit/ audit exempt file of a firm after an auditor/accountants report has been prepared, signed and issued by the auditor/accountant to their client. This review is undertaken by an independent third party reviewer .This should be conducted after the Quality Assurance review has concluded and using the new procedures adopted by the firm following the review to improve the firm’s audit quality. On completion of the cold file review, the independent reviewer prepares a report detailing their findings. On receipt of the cold file review report (“the report”), the firm is required to draft a timebound plan (“response plan”) to address any weaknesses identified in the report.

A CPA Ireland directed cold file review must be completed in line with CPA Ireland’s terms of reference. See here: (Audit) - (Non-Audit)


Hot File Review

A Hot File Review is a review conducted on an audit or non audit engagement file and completed on or before the date of signing of the auditor/accountants report by the auditor/accountant and before the auditor’s/accountant’s report is issued to the client. In the circumstances of a statutory audit engagement conducted in accordance with the Companies Act 2014, the hot file review process shall be concluded on or before the date of the statutory auditor’s report.

Where the reviewer forms the view that, in his/her professional opinion, it is appropriate for the auditor to sign the audit report and all areas of weakness as identified on the audit file have been satisfactorily dealt with prior to the audit report being signed, a copy of the clearance letter indicating that it is appropriate to sign the audit report shall be furnished to CPA Ireland and the audit Firm.
 
The audit report should not be signed by the auditor until the clearance letter has been received by the audit firm.
Firms/individuals that are subject to a hot file review condition must advise CPA Ireland on a monthly basis of the audit reports that have been signed by them during the previous month. This monthly submission should also include a copy of the supporting clearance letters issued by the Reviewer, for the audit reports signed during that period. CPA Ireland may request the submission of specific hot file review reports for review.
 
A CPA Ireland directed hot file review must be completed in line with CPA Ireland’s terms of reference. See here: HFR Terms of Reference