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

Sundaram & Associates, a firm of practising professionals, is auditing the financial statements of Kaveri Textiles Ltd, a listed company. The engagement partner says an engagement quality control review is optional because the firm's internal criteria do not flag the engagement. Under SQC 1, what is the correct position?

An engagement quality control review is mandatory for the audit of a listed company such as Kaveri Textiles Ltd. SQC 1 requires firm policies to require it for all listed-entity audits. The firm's own criteria apply only to other engagements, so the partner cannot treat it as optional.

  1. AThe review is required, because the firm's policies must require it for all audits of financial statements of listed entitiesCorrect
  2. BThe review is optional, because the firm's own criteria decide every engagement
  3. CThe review is required only if the engagement partner considers the audit risky
  4. DThe review is required only if the audit report is going to be modified

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 firm's own criteria apply only to other engagements. So the partner's view that the review is optional is wrong.

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