ISQM1, or International Standard on Quality Management 1 comprises of quality management for firms that perform audits or reviews of financial statements, or other assurance-related services engagements. ISQM is effective as of the 15th of December 2022 for audits of financial statements for periods beginning on or after that date.
The institutes will be expecting you to have ISQM1 designed and implemented by the 15th of December 2022 and the evaluation of the system will be required to be performed within one year following that date; therefore you will only need to evaluate on the 15th of December 2023.
From an overview of the new standards and revisions, we know that there is a new quality management approach focused on proactively identifying and responding to risks to quality. It is also required for a firm to customise the design, implementation and operation of its system of quality management based on the nature and circumstances of the firm and the engagements it performs. The new standards also require firms to transition from policies and procedures that address standalone elements, as required by ISQC (Ireland)1, to an integrated approach that reflects upon the system of quality management as a whole.
A system of quality management refers to the process of design, implementation and operation that is conducted in order to follow through with engagements in accordance with the standards, laws and regulations as well as ensuring that the engagement reports are appropriate.
There are eight objectives of ISQM, these are:
- Risk assessment
- Governance and leadership
- Ethical requirements
- Acceptance and continuance
- Engagement performance
- Resourced
- Information and communication
- Monitoring and remediation
The first objective ‘risk assessment’ is relatively new, and refers to a firm’s risk assessment process in order to establish quality objectives for each of the remaining seven components. This is going to help you identify what measures the firm needs to put in place in order to achieve quality.
Overall, ISQM helps to ensure a certain standard across the board when it comes to audits and reviews of financial statements. You can read more about ISQM2, ISA 220 and ISA 600 by following this link.
