09 Oct 2023
Are you are responsible for compliance in an accountancy firm? You may well have considered independent file reviews as part of your annual compliance processes, rather than performing the reviews yourself.
There are many benefits to doing this but there is one in particular that stands out. Namely, reduced risk.
This article looks at the various types of review 20:20 Innovation can offer and how they benefit accountants and auditors like you.
Read on for more information about independent file reviews and discover how 20:20 Innovation can provide support. If you would like more information about joining why not book a free 30-minute demo with our team today.
An external review is a review by someone that does not work for the firm and was not involved in performing the work.
This review could be of an audit file, disclosure in accounts or a broader review of the firm’s procedures on audit or non-audit work.
In broad terms, the key benefits are the independence and experience of the reviewer. Let's explore both pros.
The reviewer was not involved in the work and does not work for the firm, so they are not distracted by any internal politics, nor are they influenced by what they already know about the case in front of them. This means they can review the work as a stand-alone project and conclude if the documentation supports the accounts / return / opinion produced.
The review is also allocated a set time to perform the work with no distractions, ensuring that it is done in a timely manner, given appropriate attention and - for all 20:20 Innovation reviews – followed up with a debrief and detailed report. It can be difficult for senior members of staff at a firm to give the review process this much attention, as they are subject to the pressures of other work in the office.
20:20 Innovation only uses experienced reviewers that are technically up-to-date and familiar with the work of the various professional bodies. This means they can bring the perspective of hundreds of files reviewed across firms (and clients) of all sizes.
The reviewers have also helped many firms through monitoring visits from their professional bodies and so can bring a practical approach to the reviews that should ensure the firm remains compliant with the requirements of their regulator. Most firms do not have internal reviewers with the same breadth and depth of knowledge and experience.
Firms have so many issues to consider as part of their audit, tax and accountancy work. Firms have to make decisions on whether disclosure and audit work is sufficient on their audit files, as well as ensuring there are suitable policies and procedures in place for audit and non-audit work.
While the latest cloud-based accounting software, auditing software and tax software are a huge help in performing the work efficiently and in a compliant manner, reliance on software alone is not enough to ensure that work is correct and that individuals know how to deal with complex issues. Therefore, for a wide range of assignments and situations, it could be useful to have the 20:20 Innovation team review a sample of cases.
Here are some of the types of reviews available to accountants.
One of the key areas of accountancy compliance is your adherence to Audit Regulations and ISQM (UK) 1. An audit whole-firm review will allow you to evaluate whether or not your firm as a whole is compliant with both.
The review will look at the full range of internal policies and processes, to ensure that the firm has responded to the requirements of ISQM (UK) 1 and related regulations, this will mean consideration of:
Cold file reviews are a detailed evaluation of an audit file, once the audit report has been issued by the firm.
As well as a full written report, a good cold file review should involve a debrief to summarise any findings and ensure the audit team understands the points raised. Once weaknesses have been identified, the firm should identify the root causes, and 20:20 Innovation can also assist with this.
If the root causes are tackled and changes to procedures communicated to the whole firm, these cold file reviews can ultimately improve your audit quality and audit efficiency.
A hot file review is a detailed evaluation of an audit file before the audit report has been issued by the firm. Hot file reviews are relevant if you are dealing with high-risk or technically challenging audits, or if there are ethical issues that mean such a review is required by the firm’s Quality Control procedures.
This type of work will help your firm manage the risk of the cases reviewed and demonstrate to a professional body that your Quality Control procedures are being properly implemented. These reviews provide a debrief and a full written report with any issues that need to be dealt with before the audit report can be signed.
If there is just a specific part of an assignment (be it audit or non-audit) that has been assessed as high risk or in need of review, then 20:20 Innovation can help with a limited-scope review.
The review might look at specific aspects of an audit file, such as:
Or it could be reviews of non-audit files for areas such as:
The above are just examples, and the 20:20 Innovation team can review any part of the firm’s work to ensure it is performed correctly and in line with the firm’s procedures.
A Practice Assurance review looks at your non-audit work from a compliance perspective. There are four Practical Assurance standards that your firm should adhere to:
A Practice Assurance review would normally comprise of an initial verbal discussion followed by a detailed review of compliance on your accounts and tax files, as well as related procedures including engagement letters, websites and staff recruitment, training and appraisals.
These reviews usually include consideration of the firm’s compliance with PCRT and other non-audit assignments, such as Independent Examinations and grant claims.
The visit will include a full debrief and a detailed written report that will set out the findings and suggested measures for improvement.
Compliance with the Anti-Money Laundering regulations is a priority for firms as it is an area of focus for Professional Bodies and their monitoring units. An external compliance review is the perfect way for your firm to ensure it is complying with the regulations and is prepared for a monitoring visit.
An anti-money laundering compliance review looks at the firm’s procedures and then looks at a sample of client files to ensure that these procedures and implemented properly and consistently. The following areas are covered as part of an anti-money laundering compliance review:
As with other types of review, an anti-money laundering compliance review will include a full debrief and detailed report, to help the firm understand the results of the review and provide a focus for remedial action.
The DPB regime is complex and often misunderstood.
An external DPB Compliance Review will help the firm assess if its procedures (including marketing, website, engagement letters, training plans and relationships with IFAs) have been properly set up and are operating correctly.
The review will also look at a sample of client files to consider if any breaches of the regulations have taken place.
Many firms will receive and hold money from their clients that they need to keep in a separate bank account, in accordance with the Clients’ Money Regulations. The regulations themselves require a firm to conduct an annual review to monitor compliance, due to the public interest element of the firm dealing with other people’s money.
An external review of this area will examine whether the account has been set up properly, how it is operated and reconciled, as well as looking at a sample of transactions to ensure they have been treated correctly.
As with all reviews, it will produce a detailed written report and the firm will have a full debrief to ensure the findings are understood and an action plan developed.
To get the most benefit out of any external review, it is important that the firm understands the issues raised and communicates the problems (along with the resulting changes to procedures) to all individuals involved in that area of work.
An effective way to do this is for the firm to engage one of the 20:20 Innovation team to present the findings of the review via a webinar. This can then be privately held on the 20:20 Innovation website so everyone at the firm can watch it and have the CPD hours recorded automatically.
Whatever your specific requirements, most firms benefit from independent external file reviews. No matter what services you offer, your accounting practice or financial management firm will have audit and non audit work that would benefit from an external fair view.
In an industry that is rife with regulation, having an external auditor carry out a complete review is a reasonable form of risk management.
As one of the UK's leading training providers for accounting practices, 20:20 Innovation have a team of industry-leading experts who can support with file reviews and consultancy.
File reviews are available to members and non-members at extremely competitive prices and our team of practicing accountants offer practical experience and solutions.
From financial statements to UK GAAP compliance, 20:20 Innovation are here to help.
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