On 15 December 2022, ISQM 1 Quality management for firms that perform audits or reviews of financial statements, or other assurance or related services engagements becomes effective. Firms are required to design, implement, and have in operation an ISQM 1 compliant system of quality management (SOQM).

Thankfully, ICAEW (The Institute of Chartered Accountants in England and Wales) has put together some information, tips and a recommended reading and resource list to get firms started on their journey of implementation.

ISQM 1 requires firms to consider the nature and circumstances of their own practices and to adopt a proactive risk-based approach to managing audit quality. In the longer term, this may create efficiencies in your practice by targeting responses that address the specific risks your firm faces, rather than focussing on responses that are less relevant to your own firm’s nature and circumstances.

What are the components of a system of quality management?

ISQM 1 identifies eight components to address in a SOQM:

• The firm’s risk assessment process;
• Governance and leadership;
• Relevant ethical requirements;
• Acceptance and continuance of client relationships and specific engagements;
• Engagement performance;
• Resources;
• Information and communication; and
• The monitoring and remediation process

Approach to designing a SOQM

ISQM 1 identifies five components to address in designing a SOQM:

• Establish quality objectives
• Identify quality risks that threaten the achievement of those quality objectives
• Assess quality risks
• Develop and implement responses
• Monitor and revisit

Recommended reading and resource list for very small practices

ICAEW provides the following links to recommended reading and resources for firms yet to start on ISQM 1 to help you on your way:

ISQM (UK) 1 (UK version) and ISQM 1 (international version)

International Quality Management Standards – what you need to know now

• Practical tips to help with preparations:

Scalability for less complex firms

• How smaller firms with low complexity have opportunities to scale ISQM 1 to fit their nature and circumstances.

Identifying and assessing quality risks under the new ISQM 1

• This webinar focuses specifically on risk identification and assessment.

ISQM 1 and smaller firms: What will QAD be looking for?

• Even the smallest firm needs to be compliant with ISQM 1 so what will be expected?

ISQM 1: Use of resources obtained from service providers | ICAEW

• This guide explains ISQM 1 requirements in relation to service provider resources. It covers the range of information that practices might need from their service providers to help determine whether the resources they use in their SOQM or engagements are appropriate.

Webinar resources

Implementing ISQMs – a series of on demand webinars (2 hours each):

• Undertaking a quality risk assessment
• Developing a quality management strategy
• Using root cause analysis in quality management
• Quality Management technical resources hub