Why have your audit files reviewed?

People often ask why would anyone ever volunteer to have one of their audit files reviewed? Why would you put yourself through the stress just for somebody to be able to tell you that you 'could do better'?

Although we have a great deal of sympathy with that view, an independent, non-regulator review can bring enormous benefits and going forward, may be one of your responses to risk from an ISQM 1 perspective.

 

Preparing for a regulatory visit

First, it is a great way to prepare for a regulatory visit. While it will clearly be too late for that file; it’s useful to be able to demonstrate to an inspector that you realise there are areas for improvement and, even better, what you have already done about improving your processes, having already carried out an exercise to establish why the weakness occurred.

But even this is a rather negative view.

 

Improving efficiency

It is clear that the audit market is challenging and it is highly unlikely to improve going forward. The requirements arising from auditing and ethical standards are not going to get any easier. So if we are going to continue to audit, it is imperative that we go about it in the most efficient way.

The problem with this is that often efficiency improvements require investment and who wants to invest when there aren't the returns to justify it?

We would argue that without investment, your audit business will die. Although, for some firms, that may be what they want, the ones we speak to still believe there is a future.

So, make use of the review to have a discussion about how to improve efficiency.

 

The audit files review process

Our approach to file reviews is that we are there to help you; help you to produce a better file; and help you to have a more efficient and effective audit function.

Having reviewed files for many years, we are only too well aware of how staff respond to working through a file. This means that often they will complete work because the documentation includes it, rather than think about what is actually required given the risks that relate to the particular client.

A by-product of audit regulation is an unfortunate emphasis on the completion of checklists to demonstrate that we have thought about all the requirements. But we need to make sure that given all this thought, the work done actually follows what we planned.

Highlighting inefficiencies, and discussing them with you, is a normal part of our review, but we are also happy to agree a way to work with you on a more in-depth analysis. Areas this could include might be assisting with a root cause analysis, evaluating the changes required and helping implement them; whether that be changes to procedures or training.

Often it may be as simple as changing the way in which the work flow is managed. This will become more and more relevant as we move into 2022 with the impending ISQMs coming into play!

 

Audit Files Review with Mercia

If you find it difficult finding the time and resource to carry out your required annual audit compliance reviews or would like an independent review, we can help. Our teams offer a variety of audit files reviews which can be individually tailored to suit your needs.