By MIA Practice Review Department
In the process of practice review, the Practice Review Department (PRD) has encountered many instances where the audit firm (AF) selected for review tends to defer the submission of documents to the PRD without first obtaining approval from the PRD.
Deferment of submission of documents without any written approval based on an acceptable reason is a non-compliance with MIA By-Laws and a complaint can be filed against the AF. To facilitate the process of Practice Review, the AF may apply for an extension of time (EoT) for the submission, with the request being subjected to the PRD’s consideration for approval under selected circumstances only.
AFs can refer to the following Frequently Asked Questions (FAQs):
1. At what stage(s) can the AF ask for an extension?
AFs selected for review must adhere to the following submission deadlines:
- 1st review – The completed Practice Review Questionnaire (PRQ) and audit clients listing must be submitted to the Practice Review Department (PRD) within 1 month from the date of receipt of the notice of review.
- For engagement files selected for review, the AF must submit the required documents to PRD within 7 days from the date of receipt of the notification of files selection. (This will be applicable for both the 1st review and monitoring review for Type 3 cases)
- The comments on the draft report (1st review and monitoring review) must be submitted to PRD within 21 days from the date of receipt of the draft report.
- The Remedial Action Plan (RAP) and Root Cause Analysis (RCA) (for Type 3 cases) must be submitted to PRD within 1 month from the receipt of the final report.
- The AFs are required to update PRD on the progress of RAP within 3 months from the RAP approval date (for Type 3 cases)
The AF may request for an EoT to the above submissions provided there is a valid basis with supporting evidence.
2. Process for requesting EoT for submission
- The process by which an extension to a deadline for the submission of documents may be requested should be determined as follows:
- A formal application for requesting an extension is required and must be applied two (2) weeks in advance of the original deadline. The request for an extension to the deadlines should be made via official write-in (with the AF’s letterhead) and email. Evidence of the reason for the extension is required.
- AFs should not use the process as a mechanism for delay in the practice review process for more than 3 months.
- In determining whether to approve an EoT, the PRD will consider whether the reason provided (i.e. the circumstances experienced or being experienced by the AF):
- Is directly affecting or has affected the ability of the AF to submit the documents by the deadline;
- Is having or has had a significant impact between the time of the preparation of the requested documents and the deadline being set, which reasonably prevents the AF from completing and submitting their documents by that deadline;
- Could not have been foreseen;
- Are circumstances that relate to the practitioner’s medical condition and/or personal issues;
** In circumstances related to medical conditions and/or personal issues, the practitioner needs to consider if he/she will be deemed fit and able in managing the audit engagements of the firm. Should the circumstances implicate the practitioner in his ability to carry out the necessary audit work, the Institute may reconsider its support of the renewal of the audit license.
- Evidence can be in various forms, but it must be independent and sufficiently detailed to support the reason provided by the audit practitioner.
- Evidence of a medical condition must be supported by a medical report issued by a licensed medical practitioner.
3. Circumstances where extension will not be granted
- Deadlines are set such that the AF, in planning their submission, is expected to be able to work around or factor in the potential for short disruption to their firm’s daily operation. Extension will not be granted for reasons/circumstances that are perceived as having minimal effect on the firm’s ability to submit the documents in relation to the time of the submission that has been set and the deadline, unless it can be shown and supported that the circumstances have had a significant effect on the ability of the AF to submit the documents by the deadline;
** As a general rule, peak period is NOT considered as a valid reason for application of EoT as the deadline set has taken into account the time required for turnaround of responses and provision of documents.
- As a guide, a “short disruption” is deemed to be where an AF has experienced circumstances that prevents it from operating their firm for more than 1 week;
4. Length of extension
- Where it is decided by the PRD that it is appropriate to provide an extension, the agreed length of that extension will be at the sole discretion of the PRD;
- Depending on the severity of the reason provided, an extension of between 7 to a maximum of 14 days may be granted;
- Where a circumstance requires an extension beyond 14 days, the approval of the Practice Review Committee (PRC) will be required.
5. Informing the AF of the outcome
- The Institute will consider the request and provide a written response to the AF 1 week prior to the deadline;
- Where an AF missed the deadline for requesting an extension or in the event where the request for EoT was not approved, the AF shall submit their documents as soon as possible, by the pre-determined submission deadline. A Complaint can be filed against all the audit license holders of the AF should there be no response from the AF after the issuance of the final reminder.
Every member in public practice is required to ensure that his or her AF complies with all applicable professional standards on quality prescribed by the Institute and all legal and regulatory requirements.
Thus, any deferment or non-cooperation by the practitioners in meeting the submission deadline will be factored in and taken into account during the process of practice review in ensuring the compliance and quality of the respective AF. Acknowledging the various challenges and predicaments faced by the audit practitioners and unforeseen circumstances that may be encountered, PRD is willing to consider granting EoT to an AF, based on the reasonableness and nature of the circumstances.
AFs selected for review are advised to be in contact with PRD at their earliest convenience should they foresee any delay in meeting the submission deadline due to valid circumstances.
This article was originally published on eAT on 1 May 2020.