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

Rao & Associates audits Kaveri Agro Pvt Ltd, an unlisted company. The firm's quality control manual sets criteria, such as the nature of the entity, unusual risks and public interest, for deciding which other audits need an engagement quality control review. The engagement partner argues that since the client is unlisted, no review needs to be considered at all. What is the correct conclusion under SQC 1?

For an unlisted client the engagement must be tested against the firm's own established criteria. If the criteria are met, an engagement quality control review is required. Being unlisted does not exempt the audit from evaluation, because SQC 1 mandates reviews for all engagements meeting those criteria.

  1. ANo review is needed for any unlisted entity, because SQC 1 requires reviews only for listed entities
  2. BA review is needed for every audit irrespective of the entity's nature or size
  3. CA review is needed only if the client's management requests one in writing
  4. DThe engagement must be evaluated against the firm's criteria, and a review must be performed if those criteria are metCorrect

Explanation

SQC 1 requires a review for all audits of listed entities. For other engagements the firm must set criteria to decide whether a review is needed, and must require a review for every engagement meeting those criteria. The partner's argument ignores this second limb, so option A is wrong.

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