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

In an audit of Bharat Textiles Ltd, the consultations between the engagement partner and the reviewer, Vikram, have become so extensive that Vikram effectively helped shape key conclusions. The firm concludes his objectivity cannot be maintained despite care. What does SQC 1 indicate the firm should do?

The firm should appoint another individual within the firm or a suitably qualified external person to act as either the engagement quality control reviewer or the person consulted. SQC 1 requires replacement where the reviewer's ability to perform an objective review may be impaired.

  1. ALet Vikram continue, since consultation never affects eligibility
  2. BAppoint another individual within the firm or a suitably qualified external person as reviewer or as the person to be consultedCorrect
  3. CDispense with the review, since the engagement partner has already obtained advice
  4. DAsk Vikram to document that he is independent and proceed unchanged

Explanation

Where consultations become significant and objectivity cannot be maintained, SQC 1 requires another individual within the firm or a suitably qualified external person to take on the role of either reviewer or the person consulted. The firm's policies also provide for replacement where objectivity may be impaired. Dispensing with the review is not permitted.

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