In January 2022, the International Auditing and Assurance Standards Board (IAASB) published conforming and consequential amendments to ISAE 3000 (Revised) and other ISAE and ISRS standards to align with the new quality management standards (ISQM 1 and 2). These changes are effective for assurance engagements beginning on or after 15 December 2022.
One of the amendments is to the statement required in the assurance report on the application of ISQC 1. So, for assurance engagements beginning on or after 15 December 2022, the assurance report needs to include a statement that the firm of which the practitioner is a member applies ISQM 1 (or other professional requirements, or requirements in law or regulation, that are at least as demanding as ISQM 1).
This may seem clear, particularly for assurance engagements covering a reporting period beginning on or after 15 December 2022 – for example, an assurance conclusion covering “the year ending 31 December 2023”, where ISQM 1 will be referred to, and for assurance engagements covering a reporting period beginning before 15 December 2022, where ISQC 1 would still be referred to.
What happens, however, if the practitioner is giving an assurance conclusion and begins the engagement planning before 15 December 2022 but completes it and prepares the report after this date? Should the practitioner refer to ISQC 1 or ISQM 1?
In such cases, ICAEW considers that it would be helpful to determine when the practitioner has substantively started the work as a basis for determining which standard to refer to in the assurance report. A reasonable interpretation of ‘substantively started’, ICAEW believes, would be when the engagement planning procedures are performed (as opposed to the issuance of the engagement letter, which may occur potentially much earlier).
So, continuing with the above scenario, if the work on the engagement to give an assurance conclusion effective at 31 December 2022 has been substantively started before 15 December 2022, then it is likely that the assurance report would refer to ISQC 1. If the work has not been substantively started before 15 December 2022, then the report would likely refer to ISQM 1.
Similar considerations would apply in the performance of an AUP – ISRS 4400 (Revised) – engagement.
These conforming and consequential amendments do not impact the ISQM 1 requirement on firms to have designed and implemented a system of quality management by 15 December 2022.