Page 347 - CA Inter Audit PARAM

CA Ravi Taori
• Fees: Whether the client is aggressively concerned with maintaining the firm's fees as low as
possible, and indications of an inappropriate limitation in the scope of work.
• Attitude: information concerning the attitude of the client's principal owners, key management,
and those charged with its governance towards such matters as aggressive interpretation of
accounting standards and the internal control environment.
• Illegal Activities: Indications that the client might be involved in money laundering or other
criminal activities.
• Reputation: the identity and business reputation of the client's principal owners, key
management, related parties, and those charged with its governance;
• Operations: the nature of the client's operations, including its business practices;
• Conflict of Interest: If there is any conflict of interest between the firm and client, it should be
properly resolved before accepting the engagement.
• Reasons for Appointment and Non-reappointment: The reasons for the proposed appointment
of the firm and non-reappointment of the previous firm.

In the instant case, there have been raids of NIA on suspected links with terror outfits which is a criminal
activity. Further, raids by Enforcement Directorate also point towards money laundering. Therefore,
proposed offer should not be accepted.

QNO— Case Study - Accepting Assignment New Course – (SM25)
SQC.120 Bhaskar CNO - SQC.080
CA Arpita has joined a mid-sized CA firm recently. She finds that partners remain too busy and the firm
is proposing to accept audit work in areas in which it has no experience or capabilities. The firm is
proposing to accept audit of some entities engaged in emerging “fin-tech” sector. Such audits may be
requiring extensive use of technology and data analytics. However, the said firm has no such
capabilities and trained personnel. Discuss, whether, firm should accept such audits with reason.
Answer SQC 1 requires that before accepting an engagement, competence (including capabilities, time and
resources) to perform engagement have to be considered.

In the given case, the proposed engagements involve use of technology and data analytics. The firm has
no prior experience of audits in emerging “fintech” sector. The firm does not have trained personnel to
carry out these audits. Hence, offer for these audits should not be accepted.

QNO-- EQCR Applicability New Course – (M24M)
SQC.150 Bhaskar CNO – SQC.120
SQC 1 dwells upon engagement quality control review (EQCR) as part of system of quality control in a firm.
Why is such a review required? For which type of engagements EQCR is mandatory? What should be
approach of firm for engagements for which EQCR is not mandatory?

Answer Significant judgments made in an engagement should be reviewed by an engagement quality control
reviewer for taking an objective view before the report is issued. Engagement quality control review is
mandatory for all audits of financial statements of listed entities.

In respect of other engagements, firm should devise criteria to determine cases requiring performance of
engagement quality control review.

QNO-- Monitoring of System of Quality Control New Course – (N23E)
SQC.300 Bhaskar CNO – SQC.140

An auditing firm should monitor compliance with quality control policies and procedures. Discuss the

purpose of this.
Answer The purpose of monitoring compliance with quality control policies and procedures is to provide an
evaluation of:
(i) Adherence to professional standards and regulatory and legal requirements;

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