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CS Professional · Compliance Management, Audit and Due Diligence · Peer Review and Quality Review

Gupta & Partners is planning an engagement quality control review for a complex, high-risk audit. The managing partner asks how the extent of the review is determined. Which is correct under SQC 1?

The extent of the engagement quality control review depends on the complexity of the engagement and the risk that the report might not be appropriate in the circumstances. It involves selected working papers on significant judgments, not necessarily all papers, and not merely discussion with client management.

  1. AThe extent is fixed at a review of every working paper
  2. BThe extent depends on the complexity of the engagement and the risk that the report might not be appropriateCorrect
  3. CThe extent depends only on the size of the audit fee
  4. DThe extent is limited to discussion with the client's management

Explanation

SQC 1 says the review ordinarily involves discussion with the engagement partner, review of the financial statements and report, and review of selected working papers on significant judgments. Its extent depends on complexity and the risk that the report might not be appropriate. Reviewing every working paper or only talking to management is not what it says.

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