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

During the audit of Bharat Steels Ltd, a listed entity, the engagement partner repeatedly consulted the engagement quality control reviewer on several significant judgments, and the reviewer effectively helped shape the conclusions. Under SQC 1, what is the appropriate action?

Both the team and the reviewer must take care to preserve the reviewer's objectivity. If that cannot be done, the firm appoints another individual or a suitably qualified external person to act as either the reviewer or the person consulted. Consultation alone does not automatically disqualify the reviewer.

  1. AConsultation always disqualifies the reviewer, so a new reviewer must be appointed automatically
  2. BConsultation never affects the reviewer's eligibility, so no action is needed
  3. CCare must be taken to maintain objectivity, and if that is not possible, another individual or a suitably qualified external person is appointed as reviewer or as the person consultedCorrect
  4. DThe reviewer should continue, but the reviewer's documentation should be omitted from the file

Explanation

SQC 1 allows consultation without compromising eligibility, but where it becomes significant both parties must preserve the reviewer's objectivity. If that is not possible, another individual within the firm or a suitably qualified external person takes the role of reviewer or consultee. Automatic disqualification is not the rule.

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