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

Sundaram & Associates, a firm of Chartered Accountants, has been appointed to audit the financial statements of Kaveri Textiles Ltd, a listed company. The firm's quality control policy says an engagement quality control review is optional for listed entity audits and is to be decided by the engagement partner. Which statement is correct under SQC 1?

The policy is deficient. SQC 1 requires a firm to have policies that mandate an engagement quality control review for every audit of financial statements of a listed entity, so the decision cannot be left to the engagement partner's discretion.

  1. AThe policy is acceptable because the engagement partner bears final responsibility for the audit
  2. BThe policy is deficient because the firm must require an engagement quality control review for all audits of financial statements of listed entitiesCorrect
  3. CThe policy is acceptable provided the review is done after the report is issued
  4. DThe policy is acceptable if the firm has fewer than ten partners

Explanation

SQC 1 requires the firm's policies to mandate an engagement quality control review for all audits of financial statements of listed entities. It cannot be left to the discretion of the engagement partner. The partner's responsibility is not a substitute for the review.

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