by John McCarthy Consulting Ltd. | May 1, 2026 | Blog, News
Concluding our three-part series on Audit Hot Topics for 2026, last week and the week before we looked at some of the main areas that are topical at the moment. This week we look at a further tranche of issues to remind auditors as the audit season for SME entities commences.
Independence issues
Common pitfalls around audit independence include situations where:
- Individuals within firms, or entities related to the audit firm act as company secretary to audit clients or as trustee for a trust with a material interest in an audit client; and
- non-audit services provided on a contingent fee basis (normally linked to capital allowances claims, research and development tax claims or similar work) are provided.
SoQM
So that a System of Quality Management (SoQM) can be effective it needs to include:
- appropriate administrative and accounting procedures;
- an internal/external quality control process (typically hot and cold file reviews);
- effective procedures for risk assessment, and
- effective control and safeguard arrangements for the information processing system used by the audit firm i.e. data security.
If your firm needs assistance with its SoQM implementation and compliance with the ISQM 1 standard, please see our website store for the ISQM Toolkit.
Audit evidence and documentation
Many of the audit cold file review findings relate to documentation weaknesses. A very useful guidance document was published by the Chartered Accountants Ireland in March 2026 called ‘Guidance for audit evidence and documentation’ which will be a great help to audit teams to improve their audit documentation.
Our audit file review service is available either on-site or remotely where we will provide you with a written report benchmarking your audit file against the appropriate standards. You will receive a gap analysis of where your firm stands on a particular assignment within clear direction as to appropriate action to consider for improvement.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor training and brainstorming sessions to suit each firm’s unique requirements.
Publications and AML webinar:
-
- The ISQM TOOLKIT 2022 is available to purchase here.
- See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
by John McCarthy Consulting Ltd. | Apr 27, 2026 | Blog, News
Continuing our three-part series on Audit Hot Topics for 2026, last week we looked at some of the main areas that are topical at the moment. This week we look at some more to act as a reminder to auditors as the audit season for SME entities commences.
Revenue
Revenue is always one of the most significant items in any set of financial statements and is often a significant risk area. Weaknesses in testing are common in the testing of revenue, especially in the areas of:
and it’s important for audit teams to commence the testing from outside the client accounting system i.e. from the sales order (external), not from the sales invoice (internal).
Journals testing (ISA 315)
Journals entries processed at the client entity must always be tested, but many files are lacking evidence that this work is done.
Some audit firms are making good use of technology to test journals, like data analytics within Excel or specialised data analytics tools but it’s important to define the outliers you are looking for in the software so that they are appropriately tailored to the audit entity.
Accounting Estimates ISA 540
Everyone acknowledges that the audit of accounting estimates is a difficult area. Auditors need to appropriately challenge the method, assumptions and data used in the determination of the estimate. Sometimes this may involve having discussions with experts, like quantity surveyors, pensions actuaries and property valuation experts.
This communication should document an assessment and evaluation of the expert’s qualifications, experience and independence, but also challenge the expert’s approach to calculate the estimate.
Our audit file review service is available either on-site or remotely where we will provide you with a written report benchmarking your audit file against the appropriate standards. You will receive a gap analysis of where your firm stands on a particular assignment within clear direction as to appropriate action to consider for improvement.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor training and brainstorming sessions to suit each firm’s unique requirements.
Publications and AML webinar:
-
- The ISQM TOOLKIT 2022 is available to purchase here.
- See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
by John McCarthy Consulting Ltd. | Apr 20, 2026 | Blog, News
Audit Quality and ISQM
There are no major imminent changes to the ISAs Ireland for auditors of SME entities in Ireland during this reporting season, but there is a lot for auditors to think about in terms of audit quality. Recent reports from the CAI indicate that audit quality is still a burning topic. These topics were among those touched upon during the recent online Audit Conference organised by the Chartered Accountants Ireland.
Positive Conformation Requests Now Mandatory
Be aware of ISA 505 ‘External Confirmations’ which effectively bans negative confirmation requests. This became mandatory for accounting periods commencing on/after 15 December 2024, which in reality means audits for the years ending 31 December 2025.
A negative confirmation request is ‘a request that the confirming party respond directly to the auditor only if the confirming party disagrees with the information provided in the request.’ In most cases, in our experience, negative confirmations are hardly ever used in practice.
Positive external confirmation requests are defined as ‘a request that the confirming party respond directly to the auditor indicating whether the confirming party agrees or disagrees with the information in the request or providing the requested information.’
The most common of these would be debtor circularisation’s.
Obtaining Audit Evidence ISA 500
All firms need to constantly improve the documentation around obtaining audit evidence. The main areas for focus in this regard include:
Analytical Procedures ISA 520
The use of analytical procedures often brings significant benefits when used as a substantive audit procedure. Among the benefits are:
- They can provide strong audit evidence and
- They can assist the auditor gain a better understanding of the audited entity.
It is not uncommon that analytical procedures (especially at the planning stage of the audit) are not completed to a sufficiently high standard and not in the predictive way that is required. For example, simple comparisons between years do not provide sufficiently high-quality audit evidence. The comparisons need to be accompanied by commentary that is well informed about the client’s industry along with links to external news and industry insight reports and data that is sourced independently of the client entity.
Sampling ISA 530
The Financial Reporting Council removed sample size caps some years ago and this development has caused auditors no little stress. It’s always possible to justify sample size selection by professional judgement but this is often poorly documented.
It’s also important to ensure that all elements of the client’s target population have an equal opportunity of being selected across the financial period under review.
Our audit file review service is available either on-site or remotely where we will provide you with a written report benchmarking your audit file against the appropriate standards. You will receive a gap analysis of where your firm stands on a particular assignment within clear direction as to appropriate action to consider for improvement.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor training and brainstorming sessions to suit each firm’s unique requirements.
Publications and AML webinar:
-
- The ISQM TOOLKIT 2022 is available to purchase here.
- See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
- To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
by John McCarthy Consulting Ltd. | Mar 2, 2026 | Blog, News
We complete many audit cold file review assignments every year. Whilst every audit file is different, and the approach by each firm varies, there are common themes in many of the reviews we undertake. Here we look at three of the most common issues and how firms should deal with them.
IT Systems and Controls
Compliance with ISA (Ireland) 315 ‘Identifying and Assessing the Risks of Material Misstatement’ still causes problems even though the standard came into effect for accounting periods beginning 15 December 2021. Frequently, auditors fail to properly document not only key transaction cycles but also the specific control activities required under ISA 315.26 which may not be part of the transaction cycle. As a result, walkthroughs of the transaction cycle to confirm:
- Design,
- Operating effectiveness and
- Implementation
do not always cover the controls required to be reviewed.
Audit files often overlook the requirement to consider the broader control environment including areas such as:
- risk management,
- how systems and controls are monitored,
- how the culture of the entity contributes to the control environment and
- how the control environment interacts with outsourced service providers like payroll, for example.
It is not sufficient to only document the key business cycles. The audit file must also document the overarching control environment as part of the audit risk assessment.
A useful IT Controls Questionnaire (as a downloadable Word document) to help with documenting part of this process, is available on our website, for €60+VAT at this link.
Going Concern
Many audit files don’t reflect the approach to fulfil the requirements of ISA (Ireland) 570 on Going Concern.
The audit work on going concern that is evidenced on the audit file often neglects to show that management have first of all prepared their own going concern assessment, which is supposed to be reviewed and appropriately challenged by the auditors.
Instead, files often include detailed notes, prepared by the auditors, explaining why the audit team believe the entity to be a going concern, but with little evidence of a challenge of management’s assumptions included an assessment of the budgets and forecasts prepared by management. It can appear that the files include a going concern assessment prepared for management by the auditors, which an inappropriate non-audit service.
Firms are required to show that they have documented management’s assessment of going concern and show how they have tested management’s assumptions, being careful not to be biased in favour or against any particular outcome.
Fraud
Quite often we see on audit files the following text or something similar – ‘the management tell us there has never been a fraud, so therefore there is no fraud in the latest financial year’’.
This approach hardly displays the kind of scepticism required by the standard. For example, ISA (Ireland) 240.13 states (our underline) ‘the auditor shall maintain professional scepticism throughout the audit, recognizing the possibility that a material misstatement due to fraud could exist, notwithstanding the auditor’s past experience of the honesty and integrity of the entity’s management and those charged with governance.
Auditors, please also note the three Appendices at the back of ISA 240 which are not new and are well worth a read, when planning an assignment:
Appendix 1 – Examples of Fraud Risk Factors;
Appendix 2 – Examples of Possible Audit Procedures to Address the Assessed Risks of Material Misstatement Due to Fraud (we call this the ‘Auditors Toolbox’); and
Appendix 3 – Examples of Circumstances that Indicate the Possibility of Fraud.
How can John McCarthy Consulting help?
Our audit file review service is available either on-site or remotely where we will provide you with a written report benchmarking your audit file against the appropriate standards. You will receive a gap analysis of where your firm stands on a particular assignment within clear direction as to appropriate action to consider for improvement.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
- Anti-Money Laundering Policies Controls and Procedures Manual (March 2022) — View the table of contents
- Letters of engagement and similar templates—Please visit our website here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items bought together.
- ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Aug 20, 2021 | Blog, News
This is our third and final blog about the results of audit monitoring inspections during the Pandemic.
In Part 2 last week, we looked at going concern (ISA 570), subsequent events (ISA 560) and the lack of financial statement disclosures regarding COVID.
In Part 1 two weeks ago, we looked at stock attendance (ISA 501), fraud (ISA 240) and accounting systems and controls (ISA 315).
Other matters that we have seen on cold file reviews and on recent audit monitoring visits include:
Walk-through testing
Walk through tests that appear on audit files often start from within the client’s accounting system which is the wrong place to start. For walk through tests to be fully effective, they need to commence outside the main system i.e., at the authorisation stage for purchases, at the customer order stage for sales, using clock cards, timesheets and/or employment contracts for wages etc.
Ethical Standards for Auditors
The new IAASA Ethical Standards for Auditors (Ireland) 2020 are effective from 15 July 2021.
Sometimes auditors do not appreciate the implications of certain ethical standards which require appropriate safeguards to mitigate the threats posed. The most common threats we see are Long Association with Audit Engagements (audit partner in place for 10+years) and Provision of Non-Audit Services (especially for the provision of accounting, tax and company secretarial services). Firms are reminded to review the Ethical Standards (Sections 3 and 5 respectively) to ensure they have dealt appropriately with the threats and identified/implemented relevant safeguards. Quite often the only practical safeguard for sole practitioners with a long association problem is to arrange for an annual hot issue or a hot file review (also known as an Engagement Quality Control Review (EQC Review) in year 11 onwards. The implementation of safeguards needs to be properly documented.
It may be possible to apply Provisions Available for Audits of Small Entities (Section 6 PAASE) to deal with threats arising from economic dependence or where tax or accounting services are provided to certain ‘small’ entities, as defined in Section 6. Where PAASE is applied, two matters arise:
- the auditors’ report must disclose this fact and
- either the financial statements notes or the auditors’ report must include the relevant disclosures specified in ES PAASE para 6.15(b).
Small Companies Exemption Incorrectly Claimed – Schedule 5 Companies Act 2014
A reminder that entities listed in Schedule 5, Companies Act 2014 are deemed ‘large’ and often include entities regulated by the Central Bank of Ireland (e.g., ‘insurance intermediaries’). Please note that such entities cannot:
- Use FRS 102 Section 1A (which is only for certain ‘small’ entities;
- Use the Provisions Available for Audits of Small Entities;
- Avail of small companies’ audit exemption; and
- File abridged financial statements with the CRO.
Such companies must also produce a Statement of Cash Flows and disclose the remuneration of their auditors in four stated categories (for the current/prior years) for:
- audit of the company/group;
- other assurance services;
- tax advisory services; and
- other non-audit services.
For bespoke training on any of the topics mentioned here, please see our website.
