The International Standard on Quality Management (ISQM) 1 is a crucial tool for accounting firms to ensure quality throughout their operations. The ISQM1 standard requires firms to establish and maintain a system of quality management that covers; the firm's Risk Assessment Process, Governance and leadership, Relevant ethical requirements, Acceptance and continuance, Engagement performance, Resources, Information and communication, Monitoring and remediation processes.
While ISQM1 requires continuous, active quality management, in this blog post, we will focus on a firm’s annual requirements as set out by ISQM1.
So what are the Annual Requirements?
1 - An Annual Quality Management Assessment; firms must assess on an Annual Basis whether they have complied with the Quality Management Standard ISQM1. Key requirements are; An ISQM1 Manual, the appointment of a Quality Manager, documented processes and procedures for the carrying out of audits or reviews of financial statements, or other assurance or related services engagements, documented responses to the specified risks as required by ISQM1.
2 - An Annual Resource Audit; firms must assess on an Annual Basis whether it has sufficient, appropriate and adequate Human Resources, Intellectual Resources, Technological Resources and Service Provider Resources
3 - An Annual Compliance Review; firms must assess on an Annual Basis their compliance with laws, regulations and the requirements of their governing institute.
4 - Annual ISQM1 Training (Internal & External)
5 - Annual Ethical Compliance Training and Awareness
6 - Cyclical / Periodic Cold File Reviews
7 - Hot File Reviews and EQRs when applicable
If a firm identifies areas of non-compliance during its annual review, it must take appropriate action to address these issues. This may include:
1 - Carrying out Root Cause Analysis.
2 - Re-training of staff, ensuring staff awareness of the ISQM1 requirements, audit processes, ethical standards and the firm’s internal ISQM1 policies and procedures.
3 - Updating audit working papers, templates, processes and procedures.
4 - Allocating additional time for RI involvement in planning, fieldwork and completion stages.
5 - Reporting an Ethical Breach to their RAB.
Planning for Annual Requirements
To effectively manage the Annual Requirements of ISQM1, firms must actively manage quality throughout the year.
Firms should proactively plan for the Annual Requirements at the beginning of the year.
By reviewing the Annual Requirements early on, firms can develop a comprehensive plan to address each requirement throughout the year.
ISQM1 is an essential tool for accounting firms to ensure quality throughout their operations. By understanding and effectively managing the annual requirements of this standard, firms can demonstrate their commitment to quality and enhance their overall performance. With proper planning and implementation, firms can successfully navigate the complexities of ISQM1 and maintain a robust system of quality management.
OmniPro’s Accountants Resource Centre (ARC) now contains our updated ISQM1 Manual and Appendices, incorporating the ISQM2 Requirements.
Join ARC Today here.
This is an ISQM1 like no other ISQM1 on the market! It now has 21 Appendices, designed with your firm in mind and it has been written so that your firm can implement all the requirements of ISQM1, ISQM2 and ISA 220 in a timely, efficient, and effective manner.
We believe that this ISQM1 Manual and supporting Appendices will guide your practice to achieving the highest quality standards and will be fundamental to the long-term success of your firm.
This ISQM1 is all you need for ISQM Compliance and Quality Management within your Firm.
Join ARC today here.
If you need ISQM1 Training or Implementation Assistance, our Practice Support Team can be of assistance to you. To arrange your training, email Elaine on [email protected].
The contents of this article are meant as a guide only and are not a substitute for professional advice. The authors accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.