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

In reviewing the audit of Himalaya Steels Ltd, the reviewer, CA Rao, discusses matters with the engagement partner and reads the financial statements and draft report. He asks to see selected working papers on a complex impairment judgment. The engagement partner then suggests that, since CA Rao has reviewed the file, responsibility for the opinion now rests with the firm's reviewer. Which view is consistent with SQC 1?

The engagement partner stays responsible. SQC 1 says the engagement quality control review does not reduce the partner's responsibilities, and that selected working papers on significant judgments are reviewed, with extent depending on the engagement's complexity and the risk that the report may be inappropriate.

  1. AResponsibility shifts to the reviewer once selected working papers are examined
  2. BResponsibility is shared equally once the review is documented
  3. CThe reviewer's scope is wrong, as the review must cover all working papers
  4. DThe review does not reduce the engagement partner's responsibilities, and its extent depends on complexity and risk of an inappropriate reportCorrect

Explanation

SQC 1 states the review involves discussion with the engagement partner, review of the statements and report, and review of selected working papers on significant judgments. Its extent depends on complexity and risk, and it does not reduce the engagement partner's responsibilities. Options A and B contradict this.

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