When the partner and the quality reviewer disagree
What a firm should do when its engagement partner and engagement quality reviewer differ on a significant judgement, and how to record the outcome.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
The engagement partner is satisfied that the inventory provision is reasonable. The engagement quality reviewer, reading the same working paper a week before the signing date, is not. The client is waiting, the partner is senior, and the reviewer is a colleague who will be on the partner's next engagement team. Every firm that appoints quality reviewers eventually reaches this moment.
How the firm handles it says more about its system of quality management than any policy manual. This article sets out a sequence that keeps the disagreement productive, keeps the report where it belongs until the matter is settled, and leaves a record that an inspector can follow.
A disagreement means the review is working
An engagement quality review that never produces a challenge is either reviewing very simple engagements or not reviewing much. ACCA explains that under ISQM 2 the reviewer must understand the significant judgements the engagement team made, assess whether the documentation supports them, and decide whether the conclusions reached are appropriate. ACCA adds that the reviewer also evaluates the partner's independence determination, whether appropriate consultation took place on difficult or contentious matters, and the partner's own involvement.
That is a mandate to disagree when the file does not carry the conclusion. A partner who treats a reviewer's objection as obstruction has misunderstood the role, and a firm that lets that attitude stand will find its reviewers quietly stop objecting.
The partner's side of the job is described just as clearly. ACCA explains that under ISA 220 (Revised) the engagement partner is expected to review documentation on significant matters, contentious issues and conclusions at appropriate stages of the audit, and should not date the auditor's report until the engagement quality review is complete. Both people are doing what the standards ask of them.
Talk, then consult
Most disagreements dissolve in a conversation. The reviewer explains what the file does not show, the partner explains the reasoning that never made it onto paper, and the team adds the missing analysis. If that settles it, the documentation improves and nothing more is needed.
When conversation does not settle it, the next step is a formal consultation, ideally with someone who has the technical depth on the specific issue and no stake in the engagement. Frame the question precisely: not "is the provision fine?" but "given these facts and this evidence, is a provision on this basis supportable under the framework?" Give the consultee the working paper, the client's analysis and both positions in writing. A consultation that receives only the partner's summary is not independent.
The firm's difference-of-opinion route
Some disagreements survive consultation. ISQM 1 expects the firm to have a way through them. ACCA lists the eight components a system of quality management must address, and engagement performance is one of them; a policy for resolving differences of opinion sits naturally there.
A workable policy answers four questions in advance:
- Who decides when the partner and reviewer cannot agree? Often a managing partner or a technical committee, provided that person is not on the engagement.
- What happens to the report in the meantime? It is not dated or released.
- How is the resolution recorded? In writing, with each party's position and the reasoning for the outcome.
- What if the reviewer is overruled? The reviewer's position stays on file, and the firm considers whether the matter points to a wider quality risk.
Writing this down before it is needed matters. Designing the escalation route in the middle of a dispute, with a client deadline approaching, invites a resolution shaped by the deadline.
In Achekam: the report waits for the reviewer
Where an engagement has a named engagement quality reviewer, Achekam holds the auditor's report for that person. The team drafts the report on standard ISA 700, 705, 706 and 701 wording, and only the engagement partner can approve it. The partner may approve with working papers still open if a reason is recorded, but there is no equivalent override for the named reviewer: that clearance cannot be bypassed.
This mirrors what ACCA says about the stand-back: ISQM 2 requires the reviewer to determine whether the review is complete, and an audit report cannot be dated before that determination is made. A reviewer who is still unhappy simply does not clear, and the report stays where it is.
What an open consultation does not hold up
There is one gap a firm must cover with its own discipline. Staff can take a technical consultation in Achekam from question to conclusion and closure, and can record a difference of opinion with each party's position, the escalation and the resolution. However, an open consultation or an unresolved difference of opinion does not by itself stop the report from being approved or signed. A sign-off check for consultations exists on the server, but report approval does not use it today.
The practical consequence: the reviewer's withheld clearance is the control that holds the report. If the firm's policy is that no report goes out while a difference of opinion is open, the reviewer and the partner both need to check the register before clearing and approving. Put that check on the completion checklist so it does not depend on memory.
Recording how it ended
Whatever the outcome, the record should let an experienced auditor who was not involved understand what happened. Capture:
- the judgement in dispute and the working paper it sits on;
- the partner's position and the reviewer's position, each in their own words;
- who was consulted, what they were given and what they concluded;
- the final decision, who made it and why;
- any change to the financial statements, the audit work or the report that followed.
Record the difference of opinion in Achekam's register so each position and the escalation sit together, and cross-refer it from the working paper. Then the reviewer clears the report, the partner approves it, and the file tells the story without anyone having to remember it.
For how the registers fit together, see quality registers, consultations and disagreements. For appointing the reviewer in the first place, read naming an engagement quality reviewer. ACCA's technical article on ISQM 2 walks through the reviewer's responsibilities, including the stand-back, in more depth.
A firm that settles disagreements on the record, before the report is dated, has nothing to explain later.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
