Hot vs Cold Review
In audit, hot and cold reviews are two different types of engagement reviews both with the aim to improve the quality of work done. However, both test different aspects of quality control.
Hot Review
Hot reviews are carried out right before and audit report is signed and issued. They are also called engagement quality control reviews and are performed on audit engagements of all listed entities and some other engagements having significant risks. The aim is to improve the quality of individual engagements in question.
Hot reviews are typically performed by a suitably competent individual who did not previously work on the engagement being reviewed. The review mainly involves evaluating the judgements made and conclusions given to reduce audit risk and to ensure that the auditor’s opinion is appropriate.
Cold Review
Cold reviews are performed on a sample of engagements chosen for review after the audit reports have been issued. These reviews are typically performed by a dedicated quality control department of the firm on periodic basis as a part of the monitoring activities of quality control system of the firm. The aim is to detect shortcomings in the quality control policies and procedures of the firm and take corrective actions.
Cold reviews may also be performed by national regulatory authorities with aim to take deciplinary proceedings agains firms found in breach of required level of work on engagements.
by Irfanullah Jan, ACCA and last modified on