EQR reviews, previously known as ISQC1 reviews under ISQC1, are required when certain requirements of ISQM1, the Code, and firm policy are met, or when an EQR review acts as a safeguard against a threat to audit quality. Its importance should not be underestimated, as there are numerous benefits to be obtained.

Audit engagement files to be subject to EQR reviews need to be identified as soon as possible after the acceptance or continuance of an engagement to ensure the necessary resources are available to perform the review. These resources may be internal or external, a registered RA, and should have been individually independent from the audit engagement for the last two years, and not have been involved in other quality management procedures affecting the audit team, such as training or monitoring.

EQR reviews are ‘hot reviews’ of significant audit procedures, on engagements where risks of inappropriate audit opinion have been identified, while the audit is in progress, up until the signing of the audit report, as opposed to engagement monitoring reviews, which occur after the audit report has been signed to monitor firm-wide audit quality. It is important to note that all significant issues are required to be resolved by the time the audit report is signed.

The importance of this process needs to be explained and reinforced to audit engagement team members, as it has numerous objectives and benefits. Not only does it ensure compliance with audit standards, but it also acts as a welcome channel of communication of audit concerns and advice.
While the EQR reviewer is not allowed to provide advice leading to significant judgments, the requirements may be explained and practical examples given. Items identified for discussion need not be seen as findings which need to be defended, as one may have in other file reviews, but rather as points for discussion which will lead to a proper understanding of the circumstances by the EQR reviewer and audit team members alike.
With a proper understanding of the purpose and procedures relating to EQR reviews, audit engagement teams can obtain the maximum benefits from an EQR review to protect the firm’s audit risk, as well as to develop their technical knowledge and experience in audit.