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

During the audit of Kaveri Pharma Ltd., a listed company, the engagement partner has consulted the appointed engagement quality control reviewer, CA Rohan, many times on difficult judgments. The consultations have become so extensive that CA Rohan has effectively shaped the team's conclusions on key matters. What does SQC 1 indicate as the appropriate action?

Where consultations with the reviewer become significant, both the engagement team and the reviewer must take care to maintain objectivity. If objectivity cannot be preserved, the firm appoints another person from within the firm or a suitably qualified external person to act as either the reviewer or the person consulted.

  1. ANo action is needed, because consultation never affects the reviewer's eligibility
  2. BThe review requirement is waived because the reviewer was involved in the engagement
  3. CBoth the team and the reviewer must take care to maintain objectivity, and if that is not possible, another person within the firm or a suitably qualified external person is appointed as reviewer or as the person consultedCorrect
  4. DThe reviewer should sign the documentation and note the consultations as unresolved matters

Explanation

Under SQC 1, consultation with the reviewer during the engagement need not compromise eligibility. Where it becomes significant, care must be taken to preserve objectivity. If that is not possible, another individual within the firm or a suitably qualified external person is appointed in the role of reviewer or consultee. Option A is wrong because it ignores the significant-consultation caveat.

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