The International Standard on Quality Management 1 (ISQM1) comes into effect from 15 December 2022. ICAEW’s Quality Assurance Department (QAD) expects that all active audit firms will now, as a minimum, have a proper plan to ensure that their system of quality management (SoQM) will be operational from the implementation date.
Firms that choose to engage with training providers now have access to a wide range of toolkits, templates and guidance. Alternatively, they can take their own bespoke approach. There is guidance available to all firms on the ICAEW Quality Management Hub.
From 15 December 2022, all firms should be able to demonstrate the following to the QAD:
- show the key matters identified in their risk assessment with reference to the nature of the firm, its audit partners, staff and audit clients; and
- explain what impact these have on quality objectives and how these are addressed in the firm’s responses to those quality objectives.
Tailored risk assessment is key to the SoQM. Quality risks will differ substantially between firms depending on both the size of the firm and its portfolio of clients.
And while the smallest audit firms with few clients may be particularly concerned about QAD expectations, development of the SoQM for these firms will certainly be much easier compared to a larger and more complex firm.
Remember that 15 December 2022 is just the start of a new era in audit quality management. Although current focus is all about preparation of the SoQM, the most critical aspect of ISQM 1 is the operation of the SoQM in the months and years ahead, ensuring that quality risks and responses are kept up to date and the system – however simple or complex – becomes an integral part of being a registered auditor.
In December 2022, a sample of audit firms will be contacted by the QAD to find out more about their ISQM 1 implementation – the results, insights and emerging good practice will be shared with all audit firms in 2023.
QAD audit monitoring visits will also evolve from 2023, to ensure that any significant matters identified are addressed in the firm’s monitoring and remediation processes within its SoQM.
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