Page 13 - CA Final PARAM Digital Book.

7. Whether working papers selected for review reflect the work performed in relation to the significant
judgments and support the conclusions reached.
8. The appropriateness of the report to be issued.
Engagement quality control reviews for engagements other than audits of financial statements of listed
entities may, depending on the circumstances, include some or all of these considerations.

QNO Appropriateness of EQCR Reviewer Old Course – (N23M)
127.660 TITANIUM CNO-- SQC.340
CA Ragini is offered appointment to act as Engagement Quality Control Reviewer (EQCR) for the audit of
financial year 2022-23 of XPM Limited, a listed company operating from a small town. She is also based in
the same town and was not engaged previously to conduct audit of a listed entity. She accepts the
appointment to act as EQCR. She performs the review by ticking a “Yes / No” checklist and signing on some
of working papers prepared by engagement team. The audit file does not contain any material which
shows that the work of EQCR is separate from the work of the engagement team. Do you agree with the
approach adopted by EQCR? By commenting on issues involved in the above situation, discuss whether
she can be held guilty of professional misconduct.
Answer SA 330 states that irrespective of the assessed risk of material misstatement, the auditor shall design and
perform substantive procedures for each material class of transactions, account balance and disclosure. In

the given situation, the auditor has assessed the risk of material misstatement to be low. However, despite
such assessment, substantive procedures have to be performed.

SA 330 further states that the auditor shall consider whether external confirmation procedures are to be
performed as substantive audit procedures. External confirmation procedures frequently are relevant when
addressing assertions associated with account balances and their elements but need not be restricted to
these items. For example, the auditor may request external confirmation of the terms of agreements,
contracts, or transactions between an entity and other parties.

Despite the low assessed risk of material misstatement, substantive procedures have to be performed due
to the following reasons: -

(i) The auditor’s assessment of risk is judgmental and so may not identify all risks of material
misstatement and
(ii) there are inherent limitations to internal control, including management override.

It is also in accordance with the spirit of professional skepticism. Therefore, as discussed above, the approach
of CA Y is in accordance with Standards on Auditing.

QNO Assembly of Audit File New Course – (SM23)
127.675 TITANIUM CNO-- SQC.380

Ramanujan, a CA final student, feels that engagement file in audit engagement should be ready prior to
issue of audit report. Discuss whether Ramanujan’s view is in order

1. SQC 1: Reference to SQC 1, its full name & its requirement have Quality Control System.
2. Concept: CNO SQC.380 Engagement Documentation (Explain Engagement document Completion point)
Engagement Completion and Report Handling: The firm should establish policies for engagement
teams to finalize engagement files promptly, within 60 days after the auditor’s report for audit
engagements. If multiple reports are issued for the same subject matter, each report should be treated
as a separate engagement for final file assembly.
Documentation Security: Policies should ensure the confidentiality, safe storage, integrity, accessibility,
and retrievability of engagement documentation.
Documentation Retention: Engagement documentation should be retained long enough to evaluate
the firm’s compliance with its quality control system, or longer if required by law or regulation.
Specifically for audit engagements, the retention period is typically no less than seven years from the
date of the auditor’s report, or if later, the date of the group auditor’s report..

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