ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional and ethical developments
Lindqvist & Co audits a listed client. The engagement quality reviewer (EQR) assigned is the partner who led the audit of the same client for the previous six years and who rotated off the engagement last year. Under ISQM 2 and the IESBA Code approach, what is the most appropriate conclusion?
The firm should not appoint the former engagement partner as EQR yet. ISQM 2 requires a cooling-off period, at least two years, before a former engagement partner can serve as engagement quality reviewer, to safeguard objectivity. Client knowledge or disclosure to the audit committee does not remedy the familiarity and self-review threat.
- AThe appointment is acceptable because the partner has deep knowledge of the client
- BThe appointment is acceptable provided the partner discloses it to the audit committee
- CThe appointment is acceptable if the firm's quality objectives do not mention cooling-off
- DThe firm should not appoint that individual immediately, because a cooling-off period applies before a former engagement partner can act as EQRCorrect
Explanation
ISQM 2 requires the EQR to have the objectivity needed, and it sets a cooling-off period (at least two years, or longer if required by law or regulation) before a former engagement partner can be appointed as EQR. A one-year gap is insufficient. Knowledge of the client (A) is the very familiarity threat concerned. Disclosure (B) does not remove the prohibition, and the firm's wording of objectives (C) does not override the requirement.
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