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CA Final · Advanced Auditing, Assurance and Professional Ethics · Quality Control

While auditing a listed company, the engagement partner of Iyer & Partners frequently consults the appointed engagement quality control reviewer, and the consultations on significant matters have become extensive. The reviewer's objectivity may be at risk. What is the most appropriate action under SQC 1?

The team and reviewer should maintain the reviewer's objectivity, and where that is not possible, another individual in the firm or a suitably qualified external person should be appointed as either the reviewer or the person consulted. Consultation alone does not disqualify the reviewer.

  1. ADisqualify the reviewer permanently from all future firm engagements
  2. BContinue unchanged, because any consultation is automatically acceptable
  3. CDrop the review, because the reviewer has become part of the engagement team
  4. DMaintain the reviewer's objectivity, and if that is not possible appoint another person to be the reviewer or the person consultedCorrect

Explanation

SQC 1 says occasional consultation need not compromise eligibility. When consultations become significant, both the team and the reviewer take care to maintain objectivity. If this is not possible, another individual within the firm or a suitably qualified external person is appointed as reviewer or as the person to be consulted. Dropping the review is wrong since the review remains required for a listed entity.

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