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

Mehta & Rao, a firm of practising professionals, is drafting its quality control manual under SQC 1. The managing partner asks what the firm's policies on engagement quality control review must set out. Which of the following correctly lists the matters the policies should cover?

Under SQC 1 the firm's policies must set out the nature, timing and extent of an engagement quality control review, the criteria for eligibility of reviewers, and the documentation requirements. Reviewer selection by the engagement partner and fees are not part of this requirement.

  1. ANature, timing and extent of the review; criteria for eligibility of reviewers; documentation requirementsCorrect
  2. BFee to be charged for the review; rotation of the engagement partner; client acceptance limits
  3. CNature, timing and extent of the review; the engagement partner's choice of reviewer; fee for the review
  4. DEligibility criteria of reviewers and documentation requirements only, as timing is left to each reviewer

Explanation

SQC 1 requires the firm to establish policies setting out (a) the nature, timing and extent of the review, (b) criteria for eligibility of reviewers, and (c) documentation requirements. Option 3 fails because the engagement partner should not select the reviewer. Option 4 omits nature, timing and extent.

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