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

Desai & Co. audits the non-listed company Rohan Traders Pvt Ltd. The firm's quality control manual contains no criteria for deciding whether non-listed audits need an engagement quality control review; the partner says reviews are required only for listed entities. What is the correct view under SQC 1?

The manual is deficient. SQC 1 requires reviews for listed entity audits, but the firm must also set criteria to evaluate all other engagements and require a review for any engagement meeting them. Limiting reviews to listed entities without criteria does not satisfy the standard.

  1. AThe manual is adequate, because SQC 1 mandates reviews only for listed entities and nothing more
  2. BThe manual is deficient, because the firm should set out criteria to evaluate whether other engagements need a review and require a review for those meeting the criteriaCorrect
  3. CThe manual is adequate if the engagement partner personally reviews non-listed audits
  4. DThe manual is deficient, because SQC 1 requires reviews for all audits of private companies

Explanation

SQC 1 requires a review for listed entity audits and also requires the firm to set criteria against which all other engagements are evaluated, with a review required for every engagement meeting those criteria. The manual lacks such criteria. SQC 1 does not mandate reviews for all private company audits.

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