Advanced Auditing, Assurance and Professional Ethics · Quality Control

Documentation of EQC Review, Monitoring and Complaints under SQC 1

Updated 5 October 2026 · Fact-checked

Under SQC 1, the firm must document that the engagement quality control review was done before the report date, covering the reviewer's procedures, a conclusion that no unresolved matters exist, and the review's completion. The firm also monitors its quality control system periodically and investigates complaints through clear policies, with documentation of each step.

Understand Documentation of EQC Review, Monitoring and Complaints

SQC 1 asks a firm to run a system of quality control. That system has six elements: leadership responsibilities, ethical requirements, acceptance and continuance, human resources, engagement performance, and monitoring. This topic joins three pieces: proof of the EQC review, monitoring, and complaints.

Start with documentation. If it is not written, it did not happen. For an engagement where an EQC review is required, the firm's policies must require the engagement quality control reviewer to document three things. First, that the procedures required by the firm's policy on EQC review have been performed. Second, that the review was completed on or before the date of the report. Third, that the reviewer is not aware of any unresolved matters that would make the engagement team's significant judgments, or the conclusions reached, inappropriate.

Next, monitoring. A firm cannot just write policies and forget them. Monitoring is an ongoing consideration and evaluation of the system, including a periodic inspection of a selection of completed engagements. Its purpose is to give the firm reasonable assurance that the policies are relevant, adequate, operating effectively and complied with. The people who do monitoring must be objective: they should not be the ones who performed the engagement or its EQC review. The firm evaluates the effect of deficiencies found, communicates them to relevant partners and others, and acts on them.

Finally, complaints and allegations. These may come from inside or outside the firm, from staff, clients or third parties. The firm must have policies that give a clear channel to raise concerns without fear of reprisal. If a complaint alleges non-compliance with professional standards or the firm's quality control system, the firm investigates it. The investigation should be supervised by a partner with enough experience and authority, who is not involved in the engagement. Legal advice may be used where needed. Documentation of the complaint, the investigation and the response is kept.

In the exam, link the three: documentation proves compliance, monitoring checks the system, and complaints are one more signal of weakness that feeds back into monitoring.

Key rules to remember

EQC reviewer documentation: Procedures performed + review completed on or before report date + no unresolved matters; These are the three items the reviewer documents for the engagement. Say all three.
Timing rule: EQC review completion ≤ date of auditor's report; The report should not be dated before the EQC review is completed.
Purpose of monitoring: Reasonable assurance that policies are relevant, adequate, operating effectively and complied with; Use this as your opening line for any monitoring answer.
Monitoring cycle: Periodic inspection cycle normally not longer than three years, with at least one completed engagement selected for each engagement partner over that cycle; The inspection cycle is normally no longer than three years. Every engagement partner must have at least one completed engagement inspected within the cycle.
Independence of monitors: Monitoring personnel ≠ those who did the engagement or the EQC review; Objectivity is the reason.
Complaints handling: Channel to raise concerns + investigation supervised by experienced partner + documentation + corrective action; Apply when a complaint alleges breach of standards or of the firm's quality control policies.

How to solve Documentation of EQC Review, Monitoring and Complaints questions

Use this method for any question on EQC documentation, monitoring or complaints. It keeps your answer in provision-facts-conclusion form.

1Identify which of the three areas the question tests: EQC documentation, monitoring, or complaints and allegations. Some cases test two.
2State the SQC 1 requirement in one or two lines, using the correct terms: engagement quality control reviewer, monitoring, inspection, complaints and allegations.
3Pick the facts from the case that matter: report date, review completion date, who did the monitoring, who investigates, whether any issue is unresolved.
4Compare each fact with the requirement and point out the gap or the compliance.
5List the documentation the firm or reviewer should hold: procedures performed, completion date, absence of unresolved matters, investigation records, corrective action.
6Conclude clearly: compliant or not, and what the firm should do next, such as hold the report, reassign the reviewer, or escalate to a senior partner.
7If the question asks for steps, write them as short bullet points in logical order.

Quickest way: Three-Box Check

When to use it: Use when time is short and a case scenario asks whether the firm complied with SQC 1 on EQC documentation, monitoring or complaints.

Box 1, EQC file: Are the three items present (procedures done, completed by report date, no unresolved matters)?
Box 2, Monitoring: Is it periodic, with a cycle normally not longer than three years, covering at least one completed engagement for each engagement partner over that cycle, and done by objective people?
Box 3, Complaints: Is there a safe channel, an experienced independent partner investigating, and a record with action?
Mark each box as pass or fail from the facts, then write one line of reason per box.
Close with a one-line conclusion and the corrective step.

Common mistakes in Documentation of EQC Review, Monitoring and Complaints

Writing that the EQC reviewer only signs off, with no documentation.
Students remember that a review is done but forget that the reviewer must record it.
Fix: Always list the three documentation items: procedures performed, completion on or before the report date, and no unresolved matters.
Saying the EQC review can be completed after the report is dated.
Students treat the review as a follow-up check on the engagement file.
Fix: State that the report should not be dated until the EQC review is completed.
Letting the engagement partner or EQC reviewer take part in monitoring their own engagement.
Students focus on experience and forget objectivity.
Fix: Say monitoring is done by persons with sufficient experience and authority who are objective and not involved in that engagement or its review.
Treating monitoring as a single year-end check.
The word inspection suggests a one-time event.
Fix: Describe monitoring as ongoing evaluation plus periodic inspection of completed engagements over a cycle.
Ignoring complaints that come from outside the firm or are anonymous or weak.
Students assume only formal client complaints count.
Fix: Say complaints and allegations can come from within or outside the firm and must be investigated under firm policy.
Forgetting corrective action and communication of deficiencies.
Students stop at identifying the issue.
Fix: Add evaluation of the deficiency, communication to relevant partners, and remedial action. Also record the outcome.

Worked examples

Example 1

Case: Mehta & Co. audits a listed company where an EQC review is required. The engagement partner signed and dated the auditor's report on 28 May. The EQC reviewer finished the review on 30 May and filed a note stating that all review procedures were done. The note does not comment on unresolved matters. Evaluate compliance with SQC 1.

Show the solution

Provision: The EQC reviewer must document that the procedures required by the firm's policy were performed, that the review was completed on or before the date of the report, and that no unresolved matters exist that would make significant judgments or conclusions inappropriate.
Fact 1: The review ended on 30 May, but the report is dated 28 May. The review was completed after the report date.
Fact 2: The note covers procedures performed but says nothing on unresolved matters.
Comparison: Two of the three documentation items fail. Timing is breached and the unresolved-matters confirmation is missing.
Conclusion: The firm has not complied. The report should not be released or dated until the EQC review is completed and unresolved matters are confirmed. Here the firm should have the reviewer complete the review and obtain the confirmation, then date the report on or after that date (not earlier than 30 May), and record the corrective action.

Answer: The firm did not comply with SQC 1. The report was dated before the EQC review was completed, and the reviewer did not document the absence of unresolved matters. The report should not be released or dated until the review is complete and the confirmation is obtained, and then dated no earlier than 30 May, with the corrective action recorded.

Example 2

Case: A firm has three partners. In its yearly monitoring, the firm chose the engagement of Partner A for inspection, but the inspection was done by Partner A himself. Meanwhile, a junior staff member sent an email alleging that the firm skipped audit procedures on a client. The managing partner ignored the email as it was not a formal complaint. Advise the firm.

Show the solution

Provision on monitoring: Monitoring gives reasonable assurance that policies are relevant, adequate, operating effectively and complied with. It includes periodic inspection of completed engagements, and the persons doing it must be objective and not involved in the engagement or its review.
Fact: Partner A inspected his own engagement. This lacks objectivity.
Advice on monitoring: Assign an experienced person who was not involved. Also ensure that, over the inspection cycle (normally not longer than three years), at least one completed engagement is selected for each engagement partner, here B and C as well.
Provision on complaints: Complaints and allegations can come from within or outside the firm. The firm must have a channel to raise concerns, and must investigate allegations of non-compliance, supervised by an experienced partner who is not involved in the engagement. Records are kept.
Fact: The email is an allegation from within the firm about skipped procedures. Ignoring it is wrong because the form of the complaint does not matter.
Advice on complaint: Start an investigation led by a partner not on that client's team, seek legal advice if needed, document findings, take corrective action, and protect the staff member from reprisal.

Answer: The monitoring is invalid because Partner A inspected his own work. An objective person must redo it, and the cycle (normally not longer than three years) must cover at least one completed engagement of each partner. The email is an allegation and must be investigated under firm policy, with documentation, corrective action and no reprisal against the staff member.

Exam tips

Write the three EQC documentation items as a short list. Examiners look for all three.
In case scenarios, check the dates first. A review completed after the report date is a common planted error.
For monitoring answers, use the words reasonable assurance, periodic inspection, objectivity and deficiencies communicated.
For complaints, cover channel, independent experienced partner, documentation, corrective action and no reprisal.
Answer in provision-facts-conclusion form and end with the action the firm should take.

Practice questions from Quality Control

Documentation of EQC Review, Monitoring and Complaints: frequently asked questions

What must the EQC reviewer document under SQC 1?

The reviewer documents that the firm's EQC review procedures were performed and that the review was completed on or before the date of the report. The reviewer also records that no unresolved matters have come to attention that would make the team's significant judgments or conclusions inappropriate.

Who can carry out monitoring of quality control policies?

Monitoring should be done by persons with enough experience and authority in the firm. They must be objective, so they should not be involved in performing the engagement or its EQC review being inspected.

What does periodic inspection of engagements involve?

The firm selects completed engagements and checks compliance with its quality control policies. The inspection cycle is normally not longer than three years, and at least one completed engagement is selected for each engagement partner over that cycle.

How should a firm handle a complaint about audit quality?

The firm should have a way to raise concerns and should investigate any allegation of non-compliance with standards or its own policies. An experienced partner not involved in the engagement supervises the investigation, and the firm documents the findings and takes corrective action.

Can the auditor's report be dated before the EQC review is done?

No. Under SQC 1 the report should not be dated until the EQC review is completed. Dating it earlier means the firm has not complied with its own quality control requirement.