ICAS Audit Monitoring file grade definitions
By Lesley Byrne, Director of Regulatory Monitoring
21 March 2024
ICAS Audit Monitoring has changed its file review gradings for 2024 onwards to align with the FRC grading framework.
ICAS Audit Monitoring selects a sample of audit engagement files for review during each audit monitoring visit, a number of which will be selected for ‘detailed’ review and some for a ‘restricted’ review over limited aspects.
We grade those files which have been subject to a ‘detailed’ review at the end of the audit monitoring visit, once the visit has been completed and the visit has been internally quality control reviewed. Audit firms are informed of the file grading at the closedown of the visit by way of letter.
We previously operated the grading structure 1, 2A, 2B and 3. From 1 January 2024 onwards we have moved to the file grading structure below, in order to align with the FRC’s grading structure. This won’t have a significant impact on the monitoring visit as it’s essentially a re-labelling of the previous grades.
| File Grade | Description | FRC Guidance | ICAS additional context | | 1 | Good | We identified no areas for improvement of sufficient significance to include in our report. | * No concerns regarding the sufficiency and quality of audit evidence or the appropriateness of significant audit judgments in the areas reviewed.
* Only limited weaknesses in documentation of audit work. AND
* Any concerns in other areas are limited in nature (both individually and collectively). | 2 | Limited improvements required | We identified one or more areas for improvement of limited significance. | * Only limited concerns regarding the sufficiency or quality of audit evidence or the appropriateness of significant audit judgments in the areas reviewed. AND/OR
* Weaknesses in documentation of audit work are restricted to a small number of areas AND/OR
* Some concerns, assessed as less than significant (individually and collectively), in other areas. | | 3 | Improvements required | We identified one or more key findings requiring more substantive improvements. | * Some concerns, assessed as less than significant, regarding the sufficiency or quality of audit evidence or the appropriateness of significant audit judgments in the areas reviewed. AND/OR
* More widespread weaknesses in documentation of audit work. AND/OR
* Significant concerns in other areas (individually or collectively). | | 4 | Significant improvements required | We identified significant concerns in one or more areas regarding the sufficiency or quality of audit evidence, the appropriateness of key audit judgments or another substantive matter such as auditor independence. | * Significant concerns regarding the sufficiency or quality of audit evidence or the appropriateness of significant audit judgments in the areas reviewed (not limited to the documentation of the underlying thought processes). AND/OR
* Very significant concerns in other areas (individually or collectively). |
|
