Page 17 - CA Final PARAM Digital Book.

An engagement partner is usually appointed to each audit engagement undertaken by the firm, to
take responsibility for the engagement on behalf of the firm. Assigning the audit to an experienced
audit manager is not sufficient. The lack of an audit engagement partner also means that several of
the requirements of SA 220 on “Quality Control for an Audit of Financial Statement”, about ensuring
that engagements in relation to independence and directing, supervising and reviewing the audit are
not in place.

➢ Conflicting Views / Difference of Opinion ---- There should be policy for dispute
resolution / EP supposed to resolve dispute using firm’s policy
SA 220 on “Quality Control for an Audit of Financial Statement”, requires that the audit engagement
partner takes responsibility for setting disputes in accordance with the firm’s policy in respect of
resolution of difference of opinion required by SQC 1” Quality Control for Firms that Perform Audits
and Reviews of Historical Financial Information, and Other Assurance and Related Services
Engagements”.

Part III -- Facts
➢ EP not involved / Conflicting Views Exist / Refusal to Discuss

In this scenario the audit manager and senior have conflicting views about the valuation of inventory.
This does not appear to have been handled well, with the manager refusing to discuss the issue with
the senior.
Part IV -- Conclusion
➢ Lack of EP involvement / failure to resolve dispute / indicates no policy for dispute
/ Non-Compliance of SQC 1 & SA 220
In this case, the lack of engagement partner may have contributed to this failure to resolve the
disputes. In any event, at best, the failure to resolve the difference of opinion is a breach of the firm’s
policy under SQC1. At worst, it indicates that the firm does not have a suitable policy concerning
such disputes required by SQC.1 “Quality Control for Firms that Perform Audits and Reviews of
Historical Financial Information, and Other Assurance and Related Services Engagements”.

QNO Change in Engagement Partner to Review Work Old Course - (N15R,PM17,M18M,M21M)
5.000 TITANIUM CNO -- Unique

M/s Suresh Chandra & Co. has been appointed as an auditor of SC Ltd. for the financial year 2014-15. CA
Suresh, one of the partners of M/s Suresh Chandra & Co., completed entire routine audit work by 29th
May 2015. Unfortunately, on the very next morning, while roving towards office of SC Ltd. to sign final
audit report, he met with a road accident and died. CA Chandra, another partner of M/s Suresh Chandra
& Co., therefore, signed the accounts of SC Ltd., without reviewing the work performed by CA Suresh.
State with reasons whether CA Chandra is right in expressing an opinion on financial statements the audit
of which is performed by another auditor.
Answer Part I -- Relevant Standards & Laws
▪ SA 220“Quality Control for an Audit of Financial Statements”
▪ Basic Principle of Auditing on Delegation of Work
Part II -- Requirements of Relevant Standards & Laws
➢ Takeover, New Partner Should Review Work Done
Whenever there is takeover of assignment by new engagement partner, new partner should
carefully review work of old engagement partner.

➢ Review Procedures: -
• 1.Compliance of Law, Regulations, Prof Standards 2.Significant Matters
Raised & Considered 3.Appropriate Consultations 4.Conclusions Documented
5.Evidence is Sufficient & Appropriate 6.Objectives Achieved 7.Need to
Revise NTE
• The work has been performed in accordance with professional standards and
regulatory and legal requirements;(E.g., Sec 143 / IRDA Regulations / SAs)

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