Why a hot review order is imposed
Under section 38, PAOC may require steps to improve professional-standards compliance where it is partially satisfactory or not satisfactory. A hot review is review of the accountant’s work for a stipulated period by a suitably qualified person. The accountant cannot sign off an audit engagement before the independent reviewer has reviewed the work.
Reviewer qualifications, independence and prior approval
The accountant may engage a suitably qualified public accountant or former public accountant, subject to ACRA’s prior approval and no conflict-of-interest or independence issues. Within two weeks of the committee’s order-letter date, write to seek approval for the proposed reviewer or reviewers. The two-week period runs from the letter’s date, not from later informal discussions.
Mentoring does not transfer audit responsibility
The hot reviewer mentors the accountant in improving audit-process quality. Nevertheless, the accountant acting as engagement partner remains solely responsible for the signed engagement, judgments and audit opinion. Review is an improvement mechanism, not a transfer of signing responsibility to the reviewer.
Breadth, depth and timing of the review
Engage the reviewer throughout the audit promptly. Review must be more than cursory, addressing whether procedures and evidence are adequate and appropriate for key issues and judgments, particularly high-risk areas. Finish the process before concluding the audit and signing the report; document the completion date when signing the hot-review report.
Remediation and engagement-quality review
Give the reviewer ACRA’s complete findings report and the accountant’s remediation plan responding to the deficiencies in the order. The reviewer assists implementation where relevant. If the engagement already has an Engagement Quality Review under SSQM, the hot review is an additional layer focused on improving the accountant’s process rather than replacing that quality review.
Entity, engagement and financial information in the report
Although the report format is discretionary, basic information includes entity name, year end, engagement-letter date, years the partner/manager has served on the engagement, report type and sign-off date, subsequent-events work date and principal activities. It also includes materiality, performance materiality, uncorrected detected misstatements, audit approach and identified risk areas.
Issues, judgments and evidence of reviewer involvement
Record key issues identified by the accountant and discussions with the reviewer about those issues and the basis of significant judgments. Include review hours, commencement and completion dates, reviewer signature and report date. ACRA warns that merely completing and signing a checklist may not sufficiently evidence the reviewer’s actual role.
Effective date and further guidance
The direction was issued on 2 September 2024 and applies to hot review orders issued on or after that date. It refers to the separate clarifications on hot reviews and the engagement-quality-review requirements in SSQM 1 and 2.
Official source
This article independently explains the substantive contents of the official PDF, including the relevant conditions, procedures and annexes. The linked document remains the authoritative source for its original wording, and later changes should be checked separately.
Read the official PDF ↗