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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Quality management (firm and engagement level)

Lindqvist LLP audits Norra plc, a listed company. The engagement partner has proposed that the audit team's senior manager, who has worked on the audit for six years, act as engagement quality reviewer (EQR) because she knows the client best. Under ISQM 2, what is the most appropriate response?

The proposal should be rejected. Under ISQM 2 the engagement quality reviewer must be objective and must not be a member of the engagement team. A senior manager who has worked on the audit for six years is part of the team and therefore cannot serve as reviewer.

  1. AAccept, because familiarity with the client improves the quality of the review
  2. BReject, because the EQR must be objective and not a member of the engagement team, so the manager cannot perform the reviewCorrect
  3. CAccept, provided the engagement partner signs off the review conclusions
  4. DAccept, provided a cooling-off period of one year has elapsed since her last work on the audit

Explanation

ISQM 2 requires the EQR to be someone other than the engagement partner or a member of the engagement team, with objectivity and sufficient competence and authority. A senior manager on the team fails this. Cooling-off provisions concern a person who previously served as engagement partner and then wishes to become EQR, not team members generally.

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