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

Sharma & Associates, a chartered accountant firm, is the auditor of Meridian Textiles Ltd, a company whose shares are listed on a recognised stock exchange. The engagement partner proposes to issue the audit report on 10 May and to complete the engagement quality control review (EQCR) the following week for documentation purposes. What is the correct position under SQC 1?

The approach is not acceptable. SQC 1 requires the firm's policies to ensure the engagement quality control review is completed before the audit report is issued. Meridian is listed, so the review is mandatory, and completing it after the report date would defeat its objective evaluation purpose.

  1. AAcceptable, because the review may be completed after the report is issued if the partner is experienced
  2. BNot acceptable, because the firm's policies must require the EQCR to be completed before the report is issuedCorrect
  3. CAcceptable, provided the review is completed within 30 days after the report date
  4. DNot acceptable, because an EQCR is required only for unlisted entities

Explanation

SQC 1 requires the firm's policies and procedures to require completion of the engagement quality control review before the report is issued. Meridian is a listed entity, so an EQCR is mandatory for the audit. Post-report completion defeats the purpose of an objective evaluation of the significant judgments before the opinion is released.

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