One of the key concepts underlying ISQM 1 is that a firm is solely responsible for the design, implementation and operation of its own system of quality management (SoQM) – even where it obtains resources (such as manuals, tools and/or training) from service providers.
The new quality management standard, which is effective in December, specifically requires firms to establish a range of quality objectives in relation to resources, including those provided by service providers. Firms will need to consider whether resources from service providers are appropriate for use in their SoQM and performance of engagements and are likely to need information from their service providers to do this.
The guide, produced by ICAEW’s Audit and Assurance Faculty, is aimed at both service providers and audit firms so that service providers can understand the types of information that audit firms are going to need from them and to highlight to audit firms the ISQM requirements in relation to resources from service providers.
Use of third-party service providers by audit firms is extensive across areas including training, root cause analysis, internal monitoring and software implementation. Service providers may also supply, implement and maintain resources such as audit software and associated tools, such as data analytics.
However, a recent poll at a Quality Management event hosted by ICAEW’s Audit and Assurance faculty last week highlighted that the resource component of ISQM 1 was causing the most concern for firms.
Louise Sharp, Technical Manager in ICAEW’s Audit and Assurance faculty, said: “The guide should act as a helpful aid to highlight the Quality Management requirements, and the types of information that may help audit firms be in a position to identify and assess quality risks in relation to the quality objectives in ISQM 1 and the use of resources from service providers in their firms.”
The guide walks member firms through the information they might need to ask of their service providers to identify and assess any quality risks that may arise from their use across four types of resources: methodologies, training provision, software and audit quality support services such as file review/technical consultations.
Read the full guide by ICAEW
With new quality management standards for audit on the horizon, there is an opportunity for firms of all sizes to supercharge their audits and reap significant knock-on benefits that go beyond ticking the regulatory box
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