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

Anand & Partners is deciding how deeply an engagement quality control reviewer should examine two engagements: a routine audit of a small trading company and a complex audit with a high risk of an inappropriate report. A junior suggests applying identical review procedures to both and reasoning that the review reduces the partner's accountability. Which view is consistent with SQC 1?

The extent of the review varies with the engagement's complexity and the risk that the report might be inappropriate, so the two audits need not get identical procedures. The review also does not reduce the engagement partner's responsibilities; accountability stays with the partner.

  1. AThe extent depends on complexity and the risk that the report might be inappropriate, and the partner's responsibilities remain undiminishedCorrect
  2. BThe extent is fixed by the firm's size, and the partner's responsibilities shift to the reviewer
  3. CThe extent is the same for all engagements, but the partner's responsibilities shift to the reviewer
  4. DThe extent depends on the fee, and the partner's responsibilities are reduced

Explanation

SQC 1 says the extent of the review depends on the engagement's complexity and the risk that the report might not be appropriate. It also states that the review does not reduce the responsibilities of the engagement partner. The junior's reasoning is therefore wrong on both counts.

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