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hello good day tutor. why do i find the cooling off period for the engagement partner as 2 years in ISQM 2 and 5 years in ethics related content? m i missing sth here?
Welcome to my forum! Good question ….
2 years is the cooling-off period before an engagement partner can assume the role of EQ reviewer (if only 1 year, they would be reviewing an audit of financial statements with corresponding amounts that they had audited). In the words of the IESBA “this enables compliance with the principle of objectivity and the consistent performance of quality engagements”.
5 years is the cooling-off period (“partner rotation requirement”) to address threats to independence created by long association.
So, for example, Tony is the engagement partner for the audit of Orange plc and steps down from this role after 5 years (i.e. less than 7 years). He can be EQ reviewer after cooling off for 2 years.
However, if Tony is the engagement partner for the audit of Orange plc for 7 years, he can only be EQ reviewer after cooling off for 5 years. This is confirmed by:
The Code: which says that during the cooling off period the engagement partner cannot be a mamber of the engagement team or perform an EQ review.
ISQM 2: which says that the cooling-off period should be longer than 2 year “if required by relevant ethical requirements”.
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