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

Marisol Chen was the engagement partner on the audit of Valdor plc, a listed company, for six years. She is about to retire from that role and her firm proposes that she act as the engagement quality reviewer for the following year's audit. Which statement is correct under ISQM 2?

Marisol cannot immediately become the engagement quality reviewer. ISQM 2 requires a cooling-off period of at least two years, or longer if ethical requirements demand, before a former engagement partner can serve as reviewer, because familiarity and self-review threats would otherwise compromise objectivity.

  1. AShe may act immediately because she has the deepest knowledge of the client
  2. BShe may act only if the audit committee of Valdor plc approves
  3. CShe may act if she is not involved in the engagement team's work during the year
  4. DShe may not be appointed until a cooling-off period, specified in the firm's policies and not shorter than two years, has elapsedCorrect

Explanation

ISQM 2 requires a cooling-off period of at least two years (or longer if required by relevant ethical requirements) before the former engagement partner can be appointed as EQR, because of the self-review and familiarity threats. Knowledge of the client is not a reason to override this. Audit committee approval cannot remove the requirement, and non-involvement during the year does not shorten the cooling-off period.

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