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CS Professional · Compliance Management, Audit and Due Diligence · Peer Review and Quality Review

Mehta Associates is formulating its quality control policy. A partner suggests that an engagement quality control review should apply only to listed entity audits, and that no criteria are needed for any other engagement. Which view is consistent with SQC 1?

The firm must set criteria for other engagements. SQC 1 requires a review for all listed entity audits, and also requires criteria to evaluate other audits and assurance engagements, with a review required for every engagement that meets those criteria.

  1. AThe suggestion is acceptable because only listed entity audits need such a review
  2. BThe firm must set criteria to evaluate other engagements and require a review for those that meet the criteriaCorrect
  3. CThe firm should review every engagement regardless of size, since criteria are prohibited
  4. DThe firm may leave the decision to each engagement partner without any criteria

Explanation

SQC 1 requires a review for all listed entity audits and also requires the firm to set out criteria against which all other engagements are evaluated. Engagements meeting those criteria must then be reviewed. Limiting the policy to listed entities omits the criteria requirement.

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