Source and authority
Issued on 10 December 2010, the direction supersedes Practice Direction No. 4 of 2007. It describes a PMP remedial order under Accountants Act section 38(1)(a)(iii) following a failed practice review. For the stipulated period the accountant cannot sign an audit engagement until an independent, suitably qualified reviewer has reviewed the audit work. This account follows the historical direction and its SSQC references.
Qualifications, independence and responsibility
The accountant may propose a suitably qualified current or former public accountant without conflicts or independence issues. The reviewer mentors improvement of the audit process. Even after review, the signing accountant alone remains responsible for audit judgements, the opinion and signed engagements; the reviewer does not take over that responsibility.
Timely review throughout the audit
The process must have sufficient breadth and depth, not a cursory check. Engage the reviewer throughout the audit in good time to discuss whether procedures address key issues and support important judgements, particularly high-risk areas. Complete review before audit conclusion and report sign-off, and document the completion date in the signed hot-review report.
Existing quality review and remediation
An independent Engagement Quality Control Review under SSQC 1 does not remove the hot-review layer, whose particular purpose is improvement guidance. The reviewer should obtain ACRA’s complete findings report and the accountant’s remediation plan for deficiencies in the order letter, then help implement the action plans. The source refers readers to SSQC 1(R) for engagement-quality review detail.
All minimum report particulars
The report format is discretionary but should record: entity; financial year-end; engagement-letter date; partner/manager years on the engagement; audit-report type and sign-off date; subsequent-events procedures date; principal activities; materiality, performance materiality and uncorrected detected misstatements; audit approach; risks and key issues identified by the accountant; discussion with the reviewer and bases for key judgements; review hours; start and completion dates; reviewer signature; and report date. A signed checklist alone may not prove the reviewer’s work adequately.
Two separate two-week deadlines
Within two weeks of the Oversight Committee’s order-letter date, write to ACRA for approval of proposed reviewers. Within two weeks of expiry or completion of the order, whichever happens first, provide ACRA a list of audit files reviewed and the reviewers’ names. These deadlines use different triggering events.
Further questions
The direction points to Clarifications to Questions on Hot Review and ACRA’s feedback channel for further explanation. Its reference to section 38 and these linked clarifications does not add an unstated fixed review duration: the individual order specifies the period.
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 ↗