Following a series of high-profile auditing failures, the International Auditing and Assurance Standards Board (IAASB) has published its International Standard on Quality Management 1 (ISQM 1), which has significant implications if you carry out audit or assurance engagements.
The measures will come into effect on 15 December 2022.
The legislation replaces the International Standard on Quality Control 1 (ISQC 1), which has been in effect since December 2009.
It sets out requirements for audit firms to “design, implement and operate a system of quality management for audits or reviews of financial statement, or other assurance or related services engagements”.
The key requirement of ISQM 1 is for audit firms to implement a system of quality management comprising the following eight components:
Crucially, the system must be designed around a risk-based approach.
The IAASB says that systems need to be “interconnected and coordinated” and that the quality management of engagements by firms must be “proactively” managed.
Additionally, it says that firms must determine:
No. Quality management systems should be “scalable” so they appropriate to both the size and operations of the firm and of the engagement.
In general, the largest firms carrying out the largest and most complex engagements, such as those of listed companies, should have the most detailed and formalised processes in place.
Firms will be required to review and document the effectiveness of their systems of quality management in achieving their quality objectives.
We have new features in the pipeline that will enable MyWorkpapers to play a part in your firm’s system of quality management.
Watch this space for more details!
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