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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional and ethical developments

Kestrel & Co audits Brannock Ltd, a public interest entity. A regulator's inspection finds that engagement quality reviews at Kestrel were performed by individuals who had been on the audit team during the year. Under ISQM 2 and the public interest approach, which conclusion is most appropriate?

The reviews are deficient because ISQM 2 requires the engagement quality reviewer to be objective and not a member of the engagement team. Reviewing one's own work creates a self-review threat. The firm should perform proper reviews, investigate the root cause and remediate, whatever opinion was issued.

  1. AThe reviews are deficient because the engagement quality reviewer must be objective and must not be a member of the engagement team, so the firm should remediate and re-perform the reviewsCorrect
  2. BThe reviews are acceptable because team members have the best knowledge of the audit
  3. CThe reviews are acceptable provided the engagement partner approves the choice of reviewer
  4. DThe reviews are deficient only if the audit opinion was modified

Explanation

ISQM 1 requires an engagement quality review for audits of listed entities and other engagements meeting firm criteria, and ISQM 2 requires the reviewer to be objective and not part of the engagement team. Team members reviewing their own work create a self-review threat. This is a deficiency regardless of the opinion type, so the firm must remediate, including re-performing the reviews, and evaluate the root cause.

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