Advanced Auditing, Assurance and Professional Ethics · Quality Control

Engagement Quality Control Review and Eligibility of Reviewers (SQC 1)

Updated 5 October 2026 · Fact-checked

An engagement quality control (EQC) review is an objective evaluation, before the report is dated, of the engagement team's significant judgments and conclusions. Under SQC 1 it is required for audits of listed entities, where law requires it, and where the firm's risk criteria say so. Check the trigger, reviewer eligibility, review scope and report date.

Understand Engagement Quality Control Review and Eligibility of Reviewers

An audit report carries the firm's name, so the firm needs a safety check on risky engagements. The engagement quality control review is that check. A person who is not on the engagement team looks at the key judgments and the proposed report before the report is issued. The idea is a fresh, objective pair of eyes.

SQC 1 does not make EQC review compulsory for every engagement. The firm must have policies that require it for the right engagements. These are: all audits of financial statements of listed entities; engagements where law or regulation requires it; and other engagements where the firm decides, using its own criteria, that a review is needed to bring risk down to an acceptable level. Those criteria look at the nature of the engagement, including how far it involves a matter of public interest, and at unusual circumstances or risks.

The firm's policies must also say what the review covers, when it happens and how deep it goes. The report must not be dated until the review is complete. A review done after the report is signed defeats its purpose.

The reviewer must be fit for the job. SQC 1 sets two eligibility tests: the reviewer must have the technical qualifications needed, including enough experience and authority, and must be able to be consulted by the engagement team on the engagement without compromising the reviewer's objectivity. SQC 1 requires the firm's policies to ensure the reviewer's objectivity. It is good practice, and consistent with that objectivity requirement, for the firm rather than the engagement partner to appoint the reviewer. The reviewer must not take part in the engagement and must not make decisions for the team.

If the reviewer's objectivity is impaired, the firm must have a process to replace the reviewer. A small firm or sole practitioner may have no suitable person inside the firm. In that case an external person with the right qualifications can be used. SQC 1 does not fix a number of years for a cooling-off period. Your answer should say that the firm's policies must address how long a partner must wait before moving from engagement partner to reviewer, so that familiarity and self-review threats stay low.

Key rules to remember

When EQC review is required (three triggers): EQC review needed if: (1) audit of a listed entity, OR (2) law or regulation requires it, OR (3) firm's own criteria (public interest, unusual circumstances or risks) say so; Any one trigger is enough. Listed entity audits are always covered by the firm's policy. The third trigger is the firm's judgment, not a fixed list.
Reviewer eligibility criteria: Technical qualifications (experience and authority) + able to be consulted by the engagement team without compromising objectivity; Both tests must be met. Competence alone is not enough if objectivity is compromised.
Objectivity safeguards: Firm's policies ensure reviewer's objectivity; good practice is that the firm, not the engagement partner, appoints the reviewer; reviewer does not join the team; reviewer does not make team decisions; If objectivity is impaired, the firm replaces the reviewer. The firm's policy should also address cooling-off before a former engagement partner can review. Firm appointment is good practice consistent with SQC 1, not a verbatim SQC 1 rule.
Timing rule: Report date ≥ date EQC review completed; The report is not dated until the review is complete. Completion means the reviewer has no unresolved matter suggesting the significant judgments or conclusions are not appropriate.
Scope of the review: Discuss significant matters with engagement partner + review financial statements and proposed report + review selected documentation on significant judgments and conclusions + evaluate conclusions and whether the proposed report is appropriate; The review is selective and focused on significant matters. It is not a re-performance of the audit.
Extra points for listed entities: Consider: team's evaluation of firm's independence; appropriate consultation on contentious matters or differences of opinion; whether documentation selected reflects work done and supports conclusions; These are added to the basic review scope when the entity is listed.

How to solve Engagement Quality Control Review and Eligibility of Reviewers questions

Use this order for any question on EQC review. It keeps your answer in provision-facts-conclusion form.

1Read the facts and note the entity type: listed or unlisted, public interest, any law requiring review, any unusual risk.
2Decide the trigger. State the SQC 1 requirement in one line: review is required for listed entity audits, where law requires, or where firm criteria say so.
3Test the reviewer on both eligibility criteria: technical qualifications with experience and authority, and ability to be consulted by the team without compromising objectivity. Look for who appointed the reviewer and whether the person worked on the engagement.
4Check the safeguards: firm policies that protect objectivity, no team membership, no decision-making for the team, and a replacement process if objectivity is impaired. Appointment by the firm rather than the engagement partner is good practice.
5Check timing against the report date. If the report was dated before the review finished, say that is a breach.
6Check the scope of the work done: discussion with the engagement partner, review of financial statements and report, selected documentation, and evaluation of conclusions. Add the listed entity points if relevant.
7Write the conclusion in plain words: what the firm should have done, and what it must do now, such as replace the reviewer or hold the report.

Quickest way: Trigger, Person, Timing, Scope

When to use it: Use when a short MCQ or a 3 to 5 mark written answer gives you a few facts and asks whether the EQC review is proper.

Trigger: is the entity listed, does law require it, or do firm criteria apply? If none, review is not mandatory under SQC 1.
Person: is the reviewer competent and independent of the team? Did the engagement partner pick the person? If yes, objectivity is a concern and the firm should have appointed the reviewer.
Timing: was the review finished before the report date?
Scope: did the review cover significant judgments, the draft report and selected documents?
Write one line for each point, then give the conclusion.

Common mistakes in Engagement Quality Control Review and Eligibility of Reviewers

Saying EQC review is compulsory for every audit.
Students remember that listed entities need it and stretch the rule to all engagements.
Fix: State that SQC 1 requires firm policies covering listed entity audits, engagements where law requires it, and others meeting the firm's own criteria.
Letting the engagement partner choose the reviewer.
It seems practical because the partner knows who is available and senior.
Fix: SQC 1 requires firm policies that ensure the reviewer's objectivity. Good practice is for the firm, not the engagement partner, to appoint the reviewer. Present it that way, not as a verbatim SQC 1 rule.
Listing only technical qualifications as eligibility criteria.
Students focus on seniority and forget objectivity.
Fix: Always give both criteria: technical qualifications with experience and authority, and the ability to be consulted by the engagement team without compromising objectivity.
Treating the review as a re-audit.
The word review suggests checking everything.
Fix: The review is of significant judgments and conclusions and selected documentation. It is an objective evaluation, not a re-performance.
Missing the report-date rule.
Students focus on who reviews and what is reviewed, and skip timing.
Fix: Write that the report must not be dated until the review is complete, and check the dates in the case.
Quoting an exact cooling-off period as an SQC 1 rule.
Students mix SQC 1 with later or international standards.
Fix: Say that SQC 1 does not set a number of years; the firm's policies must deal with cooling-off to protect objectivity.

Worked examples

Example 1

Case: Rao & Co. is the statutory auditor of Meridian Foods Ltd., a listed company. Partner Rao leads the audit. Because the team is busy, he asks his partner Iyer, who spent three months on the audit as a senior reviewer of working papers, to do the EQC review. Iyer completes a quick review the day after the report is signed and dated. Evaluate the firm's compliance with SQC 1.

Show the solution

Trigger: Meridian Foods is a listed entity. SQC 1 requires the firm's policies to call for an EQC review of all audits of listed entities, so a review is required.
Selection: The engagement partner chose the reviewer. SQC 1 requires the firm's policies to ensure the reviewer's objectivity, and good practice is for the firm to appoint the reviewer. Selection by the engagement partner weakens objectivity and is not acceptable practice.
Eligibility: Iyer may have the experience and authority, but he worked on the engagement. A reviewer must not take part in the engagement. His objectivity is compromised and he fails the objectivity test.
Timing: The review was done after the report was signed and dated. The report must not be dated until the review is complete, so this is a breach.
Scope: A quick one-day review is unlikely to cover the discussion of significant matters, the report, selected documentation, and the extra listed entity points on independence, consultation and documentation.
Conclusion: The firm has not complied. It should have the firm appoint a suitable reviewer who was not on the team, complete a proper review, and re-date or reissue the report only after the review is complete.

Answer: The review was required because the entity is listed. It breaches SQC 1 on reviewer objectivity, timing and depth, and the engagement partner's choice of reviewer is poor practice. A new independent reviewer appointed by the firm must complete a proper review before the report is dated.

Example 2

Case: Kapoor & Associates, a small firm, audits Greenleaf Traders Pvt. Ltd., an unlisted company. No law requires an EQC review. The firm's policy says an EQC review is needed where the engagement involves significant public interest or unusual risk. Greenleaf has no public interest angle, but during the year the company changed its revenue recognition method in a way that creates a high-risk, unusual judgment. The firm has only two partners, and the second partner is the engagement partner's close relative who also worked on the audit. Is an EQC review needed, and who may do it?

Show the solution

Trigger: The entity is unlisted and no law requires a review, so the first two triggers do not apply.
Firm criteria: SQC 1 allows the firm to require a review where it judges that a review is an appropriate response to reduce risk. The firm's own policy covers unusual circumstances or risks, and the revenue recognition change is an unusual, high-risk judgment. The firm's criteria are met, so a review is needed.
Internal reviewer: The only other partner worked on the audit and is a close relative. Both objectivity and the no-participation rule fail, so this partner cannot be the reviewer.
Option: SQC 1 allows a small firm to use an external person with the right technical qualifications, experience and authority.
Safeguards: As good practice, the firm rather than the engagement partner should appoint the external reviewer. The reviewer must be able to be consulted by the engagement team on significant matters without losing objectivity, and must finish before the report is dated.
Conclusion: Appoint a suitably qualified external reviewer, complete the review of the revenue judgment, the financial statements and the proposed report, and date the report only afterwards.

Answer: Yes, a review is needed because the firm's own risk criteria are met by the unusual revenue recognition judgment. The second partner cannot do it, so an external qualified reviewer should be appointed and the report dated only after the review is complete.

Exam tips

In written answers, start with the trigger. Many students lose marks by assuming the review is needed, or not needed, without citing the three triggers.
Give both eligibility criteria every time: technical qualifications with experience and authority, and the ability to be consulted by the team without compromising objectivity. Add the safeguards in a short list.
In case MCQs, look for hidden facts: who appointed the reviewer, whether the reviewer worked on the team, and whether the report date is before or after the review.
Do not quote a fixed cooling-off number as an SQC 1 rule. Say the firm's policies must address it.
Keep the scope to significant judgments and conclusions. Words like re-perform the audit or review all documents signal a wrong option.

Practice questions from Quality Control

Engagement Quality Control Review and Eligibility of Reviewers in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Engagement Quality Control Review and Eligibility of Reviewers: frequently asked questions

When is an engagement quality control review required under SQC 1?

The firm's policies must require it for all audits of listed entities, for engagements where law or regulation requires it, and for other engagements where the firm's criteria show it is needed to reduce risk. Those criteria consider the nature of the engagement, public interest, and unusual circumstances or risks.

Who can be an engagement quality control reviewer?

The reviewer must have the technical qualifications required, including enough experience and authority, and must be able to be consulted by the engagement team without compromising the reviewer's objectivity. The reviewer is not on the engagement team. Good practice is for the firm, not the engagement partner, to appoint the reviewer. Small firms may use an external person.

Can the engagement partner choose the reviewer?

SQC 1 requires the firm's policies to ensure the reviewer's objectivity. It is good practice, and consistent with that requirement, for the firm rather than the engagement partner to appoint the reviewer. This avoids the engagement partner picking someone likely to agree. Do not present it as a verbatim SQC 1 rule.

Is there a cooling-off period for a reviewer under SQC 1?

SQC 1 does not fix a number of years. It requires the firm to protect the reviewer's objectivity, so the firm's policies should address how long a former engagement partner must wait before acting as reviewer on that engagement.

Has SQC 1 been replaced by newer standards?

ICAI has also issued the Standards on Quality Management, SQM 1 and SQM 2, with SQM 2 dealing with engagement quality reviews. Answer using the standard named in your ICAI study material and question. This page follows the SQC 1 framework.