1. Proposed ISQM 2 Imran Vanker, EQ Review Task Force Chair
IAASB Meeting, New York
Agenda Items 4-A and 4-D
December 11, 2018

2. Suggestion to include discussion and a question in the EM SMPC
Proposed ISQM 1 Extract (Agenda Item 4-D) – Engagements Subject to EQ Review
Paragraph References for IAASB Discussion
Requirements: 40(e)
Application material: A102 – A109
IESBA
Question about “significant public interest” vs. use of PIE in IESBA Code
Suggestion to include discussion and a question in the EM
SMPC
Concern about requiring an EQR for entities the firm determines are of SPI; may be open to challenge by regulators

3. Proposed ISQM 2 (Agenda Item 4-A) – Introduction and Authority
Paragraph References for IAASB Discussion
Paragraphs 1 – 8
Off-line Board comments – no significant comments
Authority (para. 8)
Approach agreed with Interim Technical Director and Managing Director – Professional Standards
Addresses Board comments in September to keep an Authority section in each QM standard, but consider ways to streamline or reduce the detailed paragraphs
Detailed AM on Authority and Preface in ISQM 1 (paragraphs A5 – A5C)

4. Proposed ISQM 2 (Agenda Item 4-A) – Objective
Paragraph References for IAASB Discussion
Paragraph 10
Objective is outcome-based (see paras in Agenda Item 4)
Offline Board comments – significant points raised
Intent of “obtain” from the EQ reviewer an objective evaluation – reporting to firm?
No reference to firm requirements for appointment and eligibility
Omission of an objective for the EQ reviewer
SMPC also commented on omission of an objective for the EQ reviewer

5. Proposed ISQM 2 (Agenda Item 4-A) – Definitions
Paragraph References for IAASB Discussion
Paragraph 11 and Application Material paragraph A1
Offline Board comments – significant points raised
Engagement quality review – question about deletion of extant reference to “formulating the auditor’s report”
Engagement quality reviewer – placement of “suitably qualified” and clarity that the reviewer could be external to the firm

6. Off-line Board comments – no significant comments
Proposed ISQM 2 (Agenda Item 4-A) – Applying and Complying with Relevant Requirements
Paragraph References for IAASB Discussion
Requirements: 12 – 14
Off-line Board comments – no significant comments

7. Proposed ISQM 2 (Agenda Item 4-A) – Appointment and Eligibility
Paragraph References for IAASB Discussion
Requirements: 15 – 18
Application material: A2 – A21
IESBA – discussions on objectivity of EQ reviewer and cooling-off period
Question about whether para. A6 creates a de facto requirement
IFIAR and IOSCO – importance of stature and seniority of the EQ reviewer
Offline Board comments – significant points raised
Reference to cooling-off period in the standard
Interaction of paras. A5 and A15 (IESBA had similar comments and suggestions)
Structure of section (firm P or P vs. requirements for EQ reviewer and assistants)
Objectivity of the individual

8. Proposed ISQM 2 (Agenda Item 4-A) – Performance of the EQ Review
Paragraph References for IAASB Discussion
Requirements: 19 – 21
Application material: A22 – A34
Offline Board comments – significant points raised
Structure of para. 21 – EQ reviewer first needs to address any concerns about significant judgments before determining that the requirements of the ISQM have been met and the engagement report can be dated
Who are the appropriate individuals in the firm to be notified if the EQ reviewer has concerns?
Responsibility for making sure that the work of assistants is appropriate (EQ reviewer retains overall responsibility)

9. Proposed ISQM 2 (Agenda Item 4-A) – Documentation of the EQ Review
Paragraph References for IAASB Discussion
Requirements: 22 – 24
Application material: A35 – A37
Offline Board comments – significant points raised
Requirement for EQ reviewer to prepare documentation vs. determining that sufficient documentation of the EQ review is prepared
Concern about review of “other documentation” required by the firm’s policies or procedures (para. 24(e))
SMPC raised point on the firm requirement to establish policies or procedures (para. 22)

10. Explanatory Memorandum
Matters identified for inclusion in the EM:
Allocation of requirements between proposed ISQM 1 and proposed ISQM 2
Engagements for which an engagement quality review is required, including entities that are of significant public interest
Objective of ISQM 2
Eligibility criteria for the engagement quality reviewer, including:
Performance and documentation of the engagement quality review
Are there are other important matters that should be addressed in the EM for proposed ISQM 2?