linecache.updatecache works as follows after it finds a module name:

fp = open(fullname, 'rU')
lines = fp.readlines()
fp.close()

It then tries to detect a file encoding comment...

The problem is that readlines fails with a UnicodeDecodeError if the 
file is utf8 encoded, the preferred locale encoding is something else 
and the file contains characters that cannot be decoded.

Instead the function should:
a) read the raw data into a bytes object 
b)then search for a file encoding comment and
c)use one if found else use utf8 since this is not the default file 
encoding.