CA Final · Advanced Auditing, Assurance and Professional Ethics · Quality Control
Iyer & Partners is a mid-sized firm. Its quality control manual says engagement quality control reviews will be performed only for listed entity audits, and it sets no criteria for deciding whether other engagements need one. A reviewer notes this gap. What is the correct conclusion under SQC 1?
The policy is deficient. Besides requiring reviews for all listed entity audits, SQC 1 requires the firm to set criteria against which all other audits and assurance or related services engagements are evaluated, and to require a review for every engagement that meets those criteria.
- AThe policy is compliant, since only listed entity audits require a review
- BThe policy is deficient, because the firm must also set criteria to evaluate all other audits and assurance engagements for whether a review is neededCorrect
- CThe policy is compliant if the firm reviews every non-listed audit with turnover above a limit fixed by the engagement partner case by case
- DThe policy is deficient only if the firm audits more than ten listed entities
Explanation
SQC 1 requires policies that mandate a review for all listed entity audits and also set out criteria against which all other audits, reviews of historical financial information and other assurance and related services are evaluated. The firm must then require a review for every engagement meeting those criteria. Having no criteria is a gap, and case-by-case partner discretion is not a set criterion.
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