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Guidelines on Submission of Working Papers to the Practice Review Department

June 12, 2020
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Guidelines on Submission of Working Papers to the Practice Review Department

By the MIA Practice Review Team

Advancements in technology and its common availability has led to profound changes in the way audit is being performed, with the majority of audit firms either taking the initiative or being pushed to evolve to embrace new ways of auditing such as data analytics, which has enabled the processing of huge amount of data in an efficient way. As such, the use of advanced technology has become an indispensable part of a reliable audit. In many cases, we are able to observe the audit practitioner as digital nomad, able to perform their work from any location and anytime with the help of technology.

From the Institute’s perspective, we encourage digitalisation and the usage of technology in helping and enhancing the process of auditing. In line with the industry-wide evolution and the Institute’s aspirations, the Practice Review Department (PRD) has incorporated the elements of technology into the practice review process.

Context:

After the review date has been agreed between the audit firm (AF) and PRD, the PRD will – based on a list of criteria, select sample engagement files for the review. Notification of selected audit engagements for review will be emailed or faxed to the AF one week before the commencement of the review. A sample letter for certification on completeness of the audit working papers for the selected engagements for practice review will also be attached together and the AF is required to submit the said certification together with the working papers prior to the review.

Commencing from September 2019, the PRD has been requesting the AFs to submit the audit working papers for the selected engagements in one of the following ways:

(i)    Upload and share the documents into cloud storage;
(ii)   Copy and transfer the documents into external storage devices; or
(iii)  Google link of all the audit working papers.

The scanned copies of the documents must be in PDF format. The PRD will not accept JPEG, GIF, TIFF or any other types of digital image file formats. It is the responsibility of the AF to ensure that all scanned copies of documents are clear and legible.

This is mandatory for both first review and monitoring review, and regardless of the mode of review, which can be either desktop review or field review at the AF’s premises, the AF must adhere to the above submission. The relevant audit working papers together with a copy of the signed audited financial statements for the respective selected engagements should be made available by the first day of the commencement of the review.

The said documents will be retained by the PRD and will serve as evidence for the findings noted. This is to avoid any dispute over the findings raised by the PRD, which based on experience, is an area of contention and time consuming for both the PRD and AF. The PRD would also like to reiterate the importance of the completion of working papers submitted as these will be what the factual findings be based upon. The onus is on the AF to ensure that no working paper is omitted in the submission, as any subsequent submission after the commencement of review will not be taken into consideration. Likewise, any alteration in the working papers is considered a serious offence.

Update – Impact of COVID-19

In light of the COVID-19 pandemic and the issuance of guidance from the government strongly advising people to practise strict social distancing, recent scheduled on-site practice review visits have not taken place as the PRD aims to minimise direct contact between people.

To prevent major disruption to the practice review work plan, the PRD has, therefore, opted for the alternative of desktop reviews and requested the AFs to submit working papers and relevant documents in softcopy for review. This is not something new as the PRD has been performing desktop reviews and taken copies of files and other materials from selected AFs for practice review since our establishment. The PRD believes that this is the best mode of practice for the time being and should the situation persist, the PRD may make additional requests to the AF to provide other relevant materials to enable the PRD to continue with the practice review. Should this pose logistical problems, the AFs are advised to reach out to the PRD as soon as possible to work out possible arrangements.

In addition, the PRD will also be conducting both initial and closing meetings with the AF through tele-conferencing, with all communications to be done without physical contact. This will be the practice of the PRD for all existing and upcoming practice reviews, unless otherwise advised in the future.

Conclusion

The AFs selected for review are advised to prepare for the submission of the working papers upon receiving the notification of files selection from the PRD to avoid any delay in submitting the documents and consequently delaying the practice review process.

The Institute acknowledges the predicaments faced by the AFs and understands that any major changes, in this case the necessity of digital acceleration due to the COVID-19 pandemic requires both time and monetary investment for those who have not or are late in embarking on this journey. However, this is undeniably the way forward and all parties are bound to embrace the changes, whether proactively or reactively, to ensure that our profession is fit for the future.

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