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

At Iyer & Associates, partner Kavita Iyer leads the audit of a listed manufacturer. She proposes that her close colleague Ramesh be the engagement quality control reviewer because he understands the client well, and she will choose him herself. Under the SQC 1 objectivity safeguards, what is the problem with this proposal?

The proposal fails because the engagement quality control reviewer must not be selected by the engagement partner. This safeguard protects objectivity. SQC 1 does not demand an external reviewer, selection by the audit committee, or appointment after the report is issued.

  1. AThe reviewer must always be a partner from another firm
  2. BThe reviewer must be selected by the client's audit committee
  3. CThe reviewer must not be selected by the engagement partnerCorrect
  4. DThe reviewer must be chosen only after the report is issued

Explanation

SQC 1 says the firm's policies should maintain the reviewer's objectivity, for example by ensuring the reviewer is not selected by the engagement partner. The standard does not require an external reviewer, selection by the audit committee, or appointment after the report.

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