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 entity. The engagement partner argues that since the audit risk is low, no engagement quality control review is needed. Under SQC 1, what is the correct position?
An engagement quality control review is required. SQC 1 says a firm's policies must require such a review for all audits of financial statements of listed entities, regardless of the engagement partner's view of risk. Risk and complexity only influence how extensive the review is.
- ANo review is needed if the engagement partner assesses the risk as low
- BAn engagement quality control review is required, as the firm's policies must require it for all audits of financial statements of listed entitiesCorrect
- CA review is needed only if the audit report is going to be modified
- DA review is needed only if a regulator specifically asks for it in writing
Explanation
SQC 1 requires the firm's policies to mandate an engagement quality control review for all audits of financial statements of listed entities. Risk assessment by the engagement partner does not remove this requirement. Risk and complexity affect only the extent of the review, not whether it is done for listed entities.
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