ACCA Strategic Professional · Advanced Audit and Assurance (International) · Quality management (firm and engagement level)

At 31 December, Morrow Associates concluded that a severe and pervasive deficiency existed in its independence monitoring, and remediation was not yet effective. Under ISQM 1, the firm's annual evaluation of the system must conclude which of the following?

Because the deficiency is severe and pervasive and remediation is not yet effective, the firm must conclude that the system does not provide reasonable assurance that its objectives are met. Beginning remediation or documenting the issue does not alter the conclusion at the evaluation date, and absolute assurance is never given.

1. AEither that the system provides reasonable assurance of meeting its objectives except for the matter, or that it does not provide reasonable assurance, depending on the severity and pervasiveness of the deficiency; here, with a severe and pervasive deficiency, it does notCorrect
2. BThe system provides reasonable assurance because remediation has begun
3. CThe system provides absolute assurance as long as the deficiency is documented
4. DNo conclusion is required until remediation is complete