## SQC 1 – Engagement Documentation, Consultation & Monitoring

### Engagement Documentation (Retention)

Engagement documentation must be retained for no shorter than 7 years from:
The date of the auditor's report, or
If later, the date of the group auditor's report

### Consultation

Consultation must take place on difficult or contentious matters.
It involves discussion at the appropriate professional level with individuals:
Within the firm, or
Outside the firm (those with specialised expertise)
Policies must maintain confidentiality, safe custody, integrity, accessibility, and retrievability of engagement documentation.

### Differences of Opinion

Differences can arise:
Within the engagement team
With those consulted
Between engagement partner and Engagement Quality Control Reviewer (EQCR)
The report must not be issued until differences are resolved.
Resolution mechanism: follow firm's established procedures (e.g., consult another practitioner, firm, or professional/regulatory body).

### Monitoring

The firm must ensure quality control policies are:
Relevant, adequate, operating effectively, and complied with in practice.
Includes ongoing consideration and evaluation of the firm's QC system.
Requires periodic inspection of a selection of completed engagements.

### EQCR – Key Rule

EQCR is mandatory for all audits of financial statements of listed entities.
The extent of EQCR depends on:
Complexity of the engagement
Risk that the report might not be appropriate
EQCR does not reduce the engagement partner's responsibilities.

Worked example

### Example 1

Example – Retention Period: An auditor signs the audit report on 31 March 2025. The group auditor's report is signed on 15 May 2025. The engagement documentation must be retained until at least 15 May 2032 (7 years from the later date).

### Example 2

Example – Difference of Opinion: During an audit of a listed company, the engagement partner and EQCR disagree on the appropriateness of a going concern opinion. The partner must not date or issue the report until the matter is resolved by consulting a senior partner or, if necessary, a professional body.

⚠️ Common exam mistakes

Counting the 7-year retention period from the engagement start date instead of the auditor's report date.
Forgetting that the group auditor's report date applies if it is later than the individual auditor's report date.
Assuming the EQCR reduces the engagement partner's personal responsibility – it does not.
Issuing the report before resolving differences of opinion between the partner and EQCR.

Reference: Elements: Engagement Documentation (R2), Consultation (C1), Monitoring — SQC 1 – Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements

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