The deadline for the design and implementation of a firm’s system of quality management (SQM) under ISQM 1 of 15 December 2022 is fast approaching. ISQM 1 (together with ISA 220 (revised) and ISQM 2) strengthen and modernise an audit firm’s approach to quality management by addressing an evolving and increasingly complex audit ecosystem, including growing stakeholder expectations and a need for quality management systems that are proactive and adaptable The standard encourages firms to design a system of quality management that is tailored to the nature and circumstances of the firm and engagements it performs. ISQM 1 which replaces ISQC 1, applies to all firms that perform engagements under the IAASB’s international standards.
The key changes in the new quality management approach amongst others include a risk based approach focused on achieving quality objectives, modernises standards to address technology, networks, and the use of external service providers, proactive monitoring of quality management systems and timely and effective remediation of deficiencies, enhances engagement partner’s responsibility for audit engagement leadership and audit quality and clarifies and strengthens requirements for a more robust engagement quality review.