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CA Final · Advanced Auditing, Assurance and Professional Ethics · Quality Control

A firm's quality control manual states that an engagement quality control review is performed only for audits of listed entities and for no other engagement. Partner Kavita says the manual is compliant with SQC 1. Which assessment is correct?

The manual is deficient. SQC 1 requires a review for all listed entity audits, but also requires the firm to set criteria for evaluating other engagements and to require a review wherever those criteria are met. Limiting reviews to listed entities alone omits this criteria requirement.

  1. AIt is deficient, because the firm must also set criteria to evaluate whether other engagements need such a review, and require one where the criteria are metCorrect
  2. BIt is compliant, because SQC 1 mandates the review only for listed entities
  3. CIt is deficient, because SQC 1 requires a review for every engagement of the firm regardless of size
  4. DIt is compliant, because the criteria for other engagements are left to the engagement partner on each assignment

Explanation

SQC 1 requires a review for all listed entity audits. It also requires the firm to set criteria for evaluating all other engagements and to require a review for those meeting the criteria. A manual silent on such criteria is deficient. It does not, however, require a review for every engagement.

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