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

Mehta & Iyer, a chartered accountancy firm, is auditing the financial statements of Sundaram Textiles Ltd, a company listed on a recognised stock exchange. The engagement partner proposes to sign and issue the audit report on 10 May. The engagement quality control review has not yet started, and the partner says it can be completed within a week after the report is issued. What is the correct position under SQC 1?

The engagement quality control review is mandatory for an audit of a listed entity and must be completed before the audit report is issued. Completing it after issue does not satisfy SQC 1, and the firm cannot treat it as optional for listed entities.

  1. AThe report may be issued, as the review can be completed after issue so long as it is documented later
  2. BThe review is not required, because the firm's own criteria decide whether any audit needs a review
  3. CThe review is required for this listed entity audit and must be completed before the report is issuedCorrect
  4. DThe review is required only if the engagement partner considers the risk of the engagement to be high

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 policies must also require that the review is completed before the report is issued. Option A fails on timing. Options B and D wrongly treat the review as discretionary, but for listed entities no discretion exists.

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