CA Final · Advanced Auditing, Assurance and Professional Ethics · Quality Control
During the audit of a listed company, the engagement partner of Desai & Co. consulted the engagement quality control reviewer, CA Nair, several times on complex revenue recognition issues. The consultations have become significant and the engagement team shaped its conclusions largely on his advice. What should the firm do under SQC 1?
The firm and the engagement team must take care to preserve the reviewer's objectivity. If that cannot be done, another individual within the firm or a suitably qualified external person must be appointed as either the reviewer or the person consulted, since significant consultation can impair objectivity.
- ATake care to maintain the reviewer's objectivity, and if that is not possible, appoint another individual or a suitably qualified external person to take on either roleCorrect
- BAllow CA Nair to continue unchanged, since any consultation with the reviewer never affects eligibility
- CDispense with the review, since the reviewer has already seen the issues during the engagement
- DDisclose the consultations in the audit report and continue with the same reviewer
Explanation
SQC 1 says consultation need not compromise eligibility, but where it becomes significant both parties must take care to maintain objectivity. If that is not possible, another individual in the firm or a suitably qualified external person takes over the role of reviewer or of the person consulted. Option B ignores the significance of the consultations.
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