You may wonder, what good would hiring a monitor reviewer bring to my firm, as he/she would be hired to identify deficiencies which in turn may get me penalized. Hence, you may also be skeptical whether or not the Inspectors would penalize you for these deficiencies.

Well, the answer would be a solid NO. In fact, it is quite common for CPA practitioners to shy away from monitor reviewers for fear that the findings they have generated may adversely affect the inspector’s impression on them. This is a common misconception because in actuality, inspectors would actually WANT you to rid yourself of petty deficiencies in order to improve your firm.  So our advice is to go ahead and hire that monitor reviewer as your first step!

But what would a monitor review encompass?

A monitor review typically consists of two key parts; Ongoing Policy Monitor (OPM) Review and Completed File Monitor (CFM) Review.

In an OPM Review, the reviewer places emphasis on your firm’s quality control and compliance with the Quality Assurance Manual, meaning that he/she will review your Firm’s / practitioner’s compliance with internal controls such as procedures of client and engagement acceptance, anti-money laundering procedures and monitoring of engagement performance etc.

On the other hand, a CFM Review would place emphasis on the quality of the actual practical audit work conducted by your Firm / Practice, during which one to two of your completed audit files would be chosen and checked for significant and repetitive errors or any isolated audit deficiencies, which is exactly why a monitor review should be timely performed and is essential so that you can rectify possible deficiencies from the CFM report’s recommendations as early as possible!

In the audit file selection process of a CFM review, some specific engagements would be more common in being selected by the monitor reviewer for review, yet the general idea behind the selection is with regards to its engagement risk. These areas may include but are not limited to:

• Clients who are public-interest entities;
• Licensed corporations such as SFC-regulated entities, for example those that engage in asset management and, dealing and advising on securities;
• Insurance brokers that are regulated by the Insurance Authority;
• Group audits involving external component auditors;
• Newly accepted clients with audit work required on opening balances;
• Clients with a relatively complex timing of revenue recognition;
• Presence of inventories and / or financial instruments.

Combining all the factors above, we would be able to identify the areas that the AFRC pays extra attention to and be vigilant about this. Hence, preparing for a inspection would revolve around performing decent quality audit work, especially in high-risk areas and of course exercising extra prudence with regards to the aforementioned engagements.

If you are interested in knowing more about our common findings, please kindly schedule an appointment with EQC Advisory and let us conduct a monitor review exercise with you. As mentioned in our website, EQC Advisory also offers practical audit training programs, hence we would humbly recommend a monitor review beforehand as your first step in allowing you to identify possible areas of deficiencies in order for you to best manage your working practices.