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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Other current issues

Marlow & Partners audits Tessa Foods, a listed company. The engagement partner proposes to appoint as engagement quality reviewer the partner who led the Tessa Foods audit for the previous six years and moved off the engagement last month. Which statement is most appropriate under ISQM 2 and ISQM 1?

The appointment is not appropriate. ISQM 2 requires the engagement quality reviewer to be objective, and firm policy must impose a cooling-off period before a former engagement partner can take the reviewer role. Deep client knowledge does not remove the self-review threat, and reviewers may be internal to the firm.

  1. AAcceptable, because the individual has the deepest knowledge of the client and is therefore competent
  2. BAcceptable, provided the reviewer does not sign the audit report
  3. CNot appropriate, because the firm should have a cooling-off period before a former engagement partner can act as reviewer, to protect objectivityCorrect
  4. DNot appropriate, because engagement quality reviewers must always come from outside the firm

Explanation

ISQM 2 requires the reviewer to be objective, and a firm's policies must require a cooling-off period (normally at least two years) before a former engagement partner can serve as the reviewer. Knowledge alone does not remove the self-review threat. Reviewers can be from within the firm, and not signing the report does not address the objectivity issue.

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