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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Quality management (firm and engagement level)

Under ISQM 1, a firm's monitoring activities include inspecting completed engagements. Which statement about this inspection is correct?

Completed engagements must be inspected on a cycle in which each engagement partner is selected at least once, and the inspectors must be objective and not have been involved in the engagement or its quality review. Self-inspection, limiting to modified opinions, or excusing small firms is not permitted.

  1. AEach engagement partner must be selected for inspection at least once in the cycle set by the firm, and inspectors must be objective and not have participated in the engagementCorrect
  2. BThe engagement partner may inspect their own files to save cost
  3. COnly engagements that produced modified opinions need to be inspected
  4. DInspection of completed engagements is prohibited for small firms

Explanation

ISQM 1 requires periodic inspection of completed engagements, with each engagement partner inspected at least once over a cycle determined by the firm. Inspectors must be objective, so those involved in the engagement or its review cannot take part. Selection is not limited to modified opinions, and small firms are not exempt.

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