ACCA Strategic Professional · Advanced Audit and Assurance (International) · Quality management (firm and engagement level)
Kestrel & Moon is auditing Zandor Ltd, a listed entity. The engagement partner, Priya, proposes that her close friend Tomas, a partner who has worked on the audit as a consultant on complex valuations, be appointed engagement quality reviewer. Under ISQM 2, which is the most significant concern with this proposal?
The main concern is objectivity. Under ISQM 2 an engagement quality reviewer must be objective and not have taken part in the engagement team's work. Tomas worked on valuations and is also a close friend of the engagement partner, creating self-review and familiarity threats, so he should not be appointed.
- ATomas is a partner, and EQRs must always be below partner level
- BTomas has participated in the engagement team's work, which threatens his objectivity and eligibility as EQRCorrect
- CTomas lacks authority to approve the audit report without the client's consent
- DTomas should not review a listed entity because EQRs are only for unlisted entities
Explanation
ISQM 2 requires the EQR to have the competence, capabilities and authority, and to be objective; an individual who participated in the engagement's work, or has a close relationship with the engagement partner, creates self-review and familiarity threats. The EQR is normally a partner or equivalent, so option A is wrong. Listed entity audits require an EQR, so option D is wrong.
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