CA Final · Advanced Auditing, Assurance and Professional Ethics · Quality Control
During the audit of Kaveri Textiles Ltd (listed), the engagement partner consulted the engagement quality control reviewer, Mr. Anand, on several complex judgments. The consultations have become significant in nature and extent, and the objectivity of Mr. Anand is now doubtful. What should the firm do?
The firm should appoint another individual from within the firm or a suitably qualified external person, either as the reviewer or as the person consulted. SQC 1 allows ordinary consultation, but where significant consultation impairs objectivity and it cannot be maintained, replacement is required.
- AContinue with Mr. Anand, since any consultation automatically disqualifies a reviewer only if it is documented
- BDrop the review, because the objectivity concern means the review cannot be performed
- CAsk the engagement partner to sign the review documentation instead of the reviewer
- DAppoint another individual within the firm or a suitably qualified external person as reviewer or as the person consultedCorrect
Explanation
Under SQC 1, consultation with the reviewer does not by itself compromise eligibility. When consultations become significant and objectivity cannot be maintained, another individual within the firm or a suitably qualified external person is appointed to take the reviewer role or the consulted role. Dropping the review for a listed entity is not allowed.
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