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

Sunrise Textiles Ltd, a listed company, is audited by Mehta & Associates, a firm of Chartered Accountants. The engagement partner proposes to issue the audit report without an engagement quality control review, since the firm has not set any criteria for such reviews. Under SQC 1, what is the correct position?

An engagement quality control review is mandatory. SQC 1 requires a firm's policies to require such a review for all audits of financial statements of listed entities, regardless of whether the firm has set criteria. The criteria-based evaluation applies only to other engagements.

  1. AAn engagement quality control review is required, because the firm's policies must require it for all audits of financial statements of listed entitiesCorrect
  2. BA review is needed only if the firm has set criteria that this audit meets
  3. CA review is needed only if the engagement partner considers the risk to be high
  4. DA review is optional for listed entities where 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. Criteria apply only to the other engagements. Option B is therefore wrong, as it applies the criteria-based test to a listed entity.

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