What it is
SQMS No. 2 sets the rules for engagement quality reviews: who may act as reviewer, what the review covers and how it is documented. Under the firm’s system of quality management (SQMS No. 1), the firm decides which engagements get an EQ review, for example because of public interest, risk or a regulatory requirement.
This checklist covers eligibility and objectivity, the procedures the EQ reviewer performs on significant judgments and the report, and the sign-off that must be complete before the engagement partner releases the report.
When to use it
- On every engagement the firm’s policies select for an EQ review.
- As evidence for peer review that the review was performed and completed on time.
What’s inside
- Reviewer eligibility: competence, authority, objectivity and any cooling-off set by firm policy
- Understanding the engagement and discussion with the engagement partner
- Significant judgments, significant risks and the team’s responses
- Review of the financial statements, the report and selected documentation
- Unresolved matters, completion and notification before the report is released
Standard cited
This template follows SQMS No. 2 / AU-C 220. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 220 explained.
Questions
When must the engagement quality review be completed?
Before the report is released. AU-C 220, as amended by SAS 146, does not allow the engagement partner to release the auditor’s report until the EQ review is complete.
Can a former engagement partner act as EQ reviewer?
SQMS No. 2 does not set a fixed cooling-off period. It requires the firm to evaluate threats to the reviewer’s objectivity, including where the individual previously served as engagement partner, and its application material says a firm may adopt a specified cooling-off period. Many firms set one in policy; the firm’s own policy governs.
When did SQMS No. 2 take effect?
SQMS No. 2 is effective for audits or reviews of financial statements for periods beginning on or after December 15, 2025, and for other engagements in the firm’s accounting and auditing practice beginning on or after December 15, 2025. SAS 146 applies to audits for periods beginning on or after the same date.
Related templates
- Audit Completion and File Review Checklist (AU-C 230 / AU-C 700)
- Engagement Independence Confirmation (AICPA Code ET 1.200)
- Peer Review Readiness Checklist
Last updated 11/04/2026. All free templates.