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CS Professional · Compliance Management, Audit and Due Diligence · Peer Review and Quality Review

After an engagement quality control review of Yamuna Steels Ltd, the reviewer Karan notes that one significant judgment on asset impairment remains unresolved with the engagement team. The partner wishes to issue the report and asks Karan to sign off, saying the review does not affect his own responsibility anyway. Which is correct under SQC 1?

Karan should not sign off yet. SQC 1 requires documentation that the review was completed before the report was issued and that the reviewer knows of no unresolved matters casting doubt on significant judgments or conclusions. The partner's retained responsibility does not excuse an open issue, so the report should wait.

  1. AKaran may sign off, since the partner retains all responsibility
  2. BDocumentation must show the reviewer is not aware of unresolved matters that would make him believe significant judgments and conclusions were inappropriate, and the review must be completed before the report is issued, so the report should not be issued until resolvedCorrect
  3. CThe report may be issued now and the matter resolved in the next year's review
  4. DThe unresolved matter need not be documented if the review does not reduce the partner's responsibility

Explanation

SQC 1 requires documentation that the review was completed before issue and that the reviewer is not aware of unresolved matters suggesting the significant judgments or conclusions were inappropriate. Although the review does not reduce the partner's responsibilities, that does not allow sign-off with an open matter. The report should wait for resolution.

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