Pre-issuance reviews short of a full EQR
When a firm should use a pre-issuance (hot) review by another partner, how it differs from an engagement quality review, and how to record one.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Not every risky file needs a formal engagement quality review, and not every file without one is safe. Between the two sits a tool many firms use without naming it: a second partner reads the file, or the parts of it that matter, before the report goes out. It is usually called a hot review or a pre-issuance review.
Used deliberately, a hot review catches problems while they can still be fixed, and it costs far less than an engagement quality review. Used casually, it becomes a favour between partners that leaves no trace on the file and confuses everyone about who was responsible for what. This article explains when a hot review earns its place, how it differs from an engagement quality review, and how to record one.
Hot review versus engagement quality review
The two look similar from a distance: another senior person looks at the file before issue. The differences are in purpose, eligibility and consequence.
| Engagement quality review | Hot review | |
|---|---|---|
| Basis | ISQM 2, for engagements the firm's ISQM 1 policy requires | The firm's own policy, as a quality response or in-process monitoring |
| Focus | Objective evaluation of significant judgements and conclusions | Whatever the policy says: the whole file or chosen areas |
| Reviewer | Must meet ISQM 2 eligibility, including objectivity | Usually an experienced partner from another team |
| Effect on the report | Report not dated until the review is complete | Advice to the engagement partner, unless policy says otherwise |
The engagement partner stays responsible for the audit in both cases. A hot review does not share that responsibility; it gives the engagement partner a second opinion while there is still time to act on it.
ACCA's article on ISQM 2 and ISA 220 (Revised) explains the engagement quality review and quality management at the level of a single audit, which is the right background for deciding where a hot review fits.
Engagements that benefit from one
A hot review is most useful where the risk is real but the firm's policy does not call for an engagement quality review. Typical cases:
- a newly appointed partner's first signed audits;
- a first-year client with a difficult opening position;
- a modified opinion or an emphasis of matter on going concern;
- a client in an industry the team has not audited before;
- a file that ran far over budget or was completed under severe time pressure.
Write the criteria into your quality manual. A hot review chosen case by case, on a partner's instinct, is hard to defend when an inspector asks why one risky file had one and another did not. The question of which engagements need the full review is covered in which engagements should have a quality review.
Who can do it
The hot reviewer should be experienced in the industry and type of engagement, and should not be on the engagement team. They need not meet every eligibility rule for an engagement quality reviewer, but objectivity still matters: a partner who supervises the engagement partner's own work, or who shares the client relationship, is a weak choice.
In Achekam the formal role is distinct. A partner can name an engagement quality reviewer, who must be a partner or senior manager not on the engagement team, and that person must clear the audit report before it can be issued. For a South African firm, Achekam does not require such a reviewer for any engagement type; naming one is the firm's decision.
That gives you a choice. If your policy wants the hot review to act as a gate, naming the hot reviewer in that role makes the report wait for their clearance, and the clearance cannot be bypassed even when the engagement partner approves the report with papers still open by recording a reason. If your policy treats the hot review as advice, do not use the role, because the system will treat the person as an engagement quality reviewer.
Recording the review and its notes
A hot review that leaves no record did not happen, as far as an inspector is concerned. Record three things:
- What was reviewed. Name the papers and areas, and the date.
- What the reviewer raised. On working papers, a reviewer can raise review notes, the preparer answers and the reviewer clears them, and each note's history is kept. Using notes rather than e-mail puts the challenge on the paper it concerns.
- The reviewer's conclusion. A short memo on the file stating whether the matters raised were resolved before issue.
Working papers in Achekam move through preparation, manager review, partner review, an optional engagement quality review stage, completion and lock. The optional stage belongs to the formal reviewer; a hot reviewer's notes sit on papers at whatever stage they are in.
Keep a firm-level record too. The quality registers, kept on Achekam's server with every version and who changed it, are the natural place to log which files received a hot review and what themes came up, so the quality partner can see patterns across the year.
Using another firm
A sole practitioner or a two-partner firm may have nobody objective to ask. One option is an experienced practitioner from another firm, engaged under a written agreement covering confidentiality, scope and timing.
Keep that separate from a different service Achekam supports. A firm can send a frozen set of statements to another firm on Achekam, or to an outside practitioner by e-mailed link, for an independent review under ISRE 2400 (Revised) or an audit, with the reviewer's signed report bound to that version. That makes the other firm the reviewer or auditor of the statements, not a hot reviewer of your audit. Independent review by another firm explains it.
Setting the policy
Draft one paragraph for your quality manual: which engagements get a hot review, who may perform one, whether it holds back the report, and where it is recorded. Then apply it to the engagements due in the next quarter, and book the reviewers now.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
