First of all, you should know that HKSQM 1 requires that a CFM Review is conducted on an audit / assurance engagement for each practitioner at least once every three years. However, we do insist that a CFM Review should be conducted at least on an annual basis for quality assurance, and to ensure that the quality of your Inspection’s audit work is improved from any deficiencies identified.

Human resources are your greatest assets. Employees’ salaries of up to hundreds of thousands, if not millions, of dollars are incurred annually, yet how much has your Inspection done to ensure that their work is up-to-standard and carried out with efficiency and effectiveness?

Regular health checks on completed engagements prepared and reviewed by each of your team members, especially audit semi-seniors / seniors / supervisors and managers would significantly help to ensure that their daily duties work towards protecting your Inspection.  Inspection sustainability has become more important in the current unstable economic environment.

Quality assurance starts from practitioners effectively communicating to your employees, or even sub-contractors, on the importance of audit quality, and our review may act as one of your control points in identifying significant deficiencies that actually matter, and help to ensure that you are on your way to resolving them.

The number of engagements that should be reviewed depends on a number of factors, such as the number of independent audit employees your Inspection has, and how varied your potential deficiencies are across your audit engagements.  For example, while your highest audit fee engagement may be a sizable HKFRS engagement with inventories or investments in subsidiaries / associates, a CFM review of this engagement may not be able to address other key audit issues, such as justification of a modified opinion, new client acceptance procedures, or procedures in a group audit.

We suggest that engagements with the following characteristics should be selected on a rotation basis every year, such that each of the following types of engagements is at least reviewed once every 3 years:

• Engagement using SME-FRS
• Engagement using HKFRS for PE
• Engagement using HKFRS / IFRS
• Engagements prepared and reviewed by different employees
• Engagements with the highest audit fees
• Regulated entities
• Engagements with inventories, financial instruments, intangible assets, going concern issues, or impairment risks
• Group audits with and / without external component auditors
• Clients that have been reviewed by a inspector in the past with multiple significant findings
• Engagements with modified audit opinion / disclaimer of opinion
• Subsequent engagements that have been reviewed by a monitor reviewer a few years ago

No, a CFM Review is not necessarily performed on-site. You only need to submit a scanned copy for all the required files for us, and we will conduct a desktop review from our office. We may then present our findings in a report, over Zoom or even in-person.

Your Inspection should provide us with a scanned copy of the audit working paper file / working file (including professional clearance letters, engagement letters, client / engagement acceptance documents, management-signed letters and confirmations) and the audited financial statements of the selected audit file.

You may also courier the selected audit file to our office in Central at 3/F., World Trust Tower, 50 Stanley Street, Central, Hong Kong

You should consider purchasing AP3.0 credits, so your team may use the completed audit programs as a pro-forma and also act as remedial actions to an external monitoring review.