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CA Final · Advanced Auditing, Assurance and Professional Ethics · Quality Control

Mehta & Associates, a CA firm, is auditing the financial statements of Sundaram Textiles Ltd, a listed company. The engagement partner argues that since the team is experienced and no complex issues arose, no engagement quality control review is needed. Under SQC 1, what is the correct conclusion?

An engagement quality control review is required, because SQC 1 says a firm's policies must require such a review for all audits of financial statements of listed entities. Partner experience, absence of complex issues or firm size does not remove this requirement.

  1. AAn engagement quality control review is required because the firm's policies must require it for all audits of financial statements of listed entitiesCorrect
  2. BAn engagement quality control review is optional for listed entities if the engagement partner has more than ten years of experience
  3. CAn engagement quality control review is required only if the audit team identifies significant risks
  4. DAn engagement quality control review is required only if the firm has more than one partner

Explanation

SQC 1 requires the firm's policies to mandate an engagement quality control review for all audits of financial statements of listed entities. The review does not depend on the partner's experience, on risks identified or on firm size, so the partner's argument fails.

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