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Quality Management [ED]

Effective date:

The IAASB standards become effective on December 15, 2022

Next steps:

The AASB expects to approve final CSQM 1, CSQM 2, Engagement Quality Reviews, and CAS 220 (Revised), Quality Management for an Audit of Financial Statements, at its January 2021 meeting.

Last up­dated:

December 2020

 

Overview

In February 2019, the International Auditing and Assurance Standards Board (IAASB) released several Exposure Drafts that propose to bring important changes to the way professional accountancy firms are expected to manage quality—for audits, reviews, and other assurance and related services engagements.

They consist of:

The proposed standards include a new proactive risk-based approach to effective quality management systems within firms that establish the foundation for consistent engagement quality. The new approach improves the scalability of the standards because it promotes a system tailored to the nature and circumstances of the firm and its engagements.

As set out in the Overall Explanatory Memorandum, The IAASB’s Exposure Drafts for Quality Management at the Firm and Engagement Level, Including Engagement Quality Reviews, the IAASB’s proposals intended to improve engagement quality through:

  • Modernizing the standards for an evolving and increasingly complex environment, including addressing the impact of technology, networks, and use of external service providers;
  • Increasing firm leadership responsibilities and accountability, and improving firm governance;
  • More rigorous monitoring of quality management systems and remediating deficiencies;
  • Enhancing the engagement partner’s responsibility for audit engagement leadership and audit quality; and
  • Addressing the robustness of engagement quality reviews, including engagement selection, documentation, and performance.

Given the significance of the changes and the need for firms to adjust how they manage quality, the IAASB had also developed draft guidance and tools, such as examples and frequently asked questions. These materials help firms understand the proposals, including how to apply them in different circumstances.

In December 2020, the IAASB released its three quality management standards. The standards promote a robust, proactive, scalable and effective approach to quality management and mark a significant evolution of the existing quality control standards.

The suite of standards includes:

  • International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
  •  ISQM 2, Engagement Quality Reviews; and
  • International Standard on Auditing 220 (Revised), Quality Management for an Audit of Financial Statements.

The standards become effective on December 15, 2022.

The AASB expects to adopt these IAASB standards with appropriate Canadian amendments, if any.

For further details refer to the relevant projects on the IAASB’s website, namely:

There is also a corresponding project on the AASB’s website, namely:

 

Other developments

December 2020

On December 17, 2020, the IAASB released its three quality management standards. The standards promote a robust, proactive, scalable and effective approach to quality management and mark a significant evolution of the existing quality control standards.

May 2020

On May 18, 2020, the IAASB issued a Revised Detailed Work Plan reflecting the impact of COVID-19 on its work. The IAASB now expects to approve the final proposed ISQM 1, ISQM 2, and ISA 220 (Revised) at its September 2020 meeting.

April 2019

On April 5, 2019, the AASB issued an Exposure Draft proposing the adoption of ISQM 1, ISQM 2 and ISA 220 (Revised), with appropriate Canadian amendments, if any. Comments are requested by June 7, 2019.

February 2019

On February 8, 2019, the IAASB issued for comment several Exposure Drafts that propose to bring important changes to the way professional accountancy firms are expected to manage quality—for audits, reviews, and other assurance and related services engagements. Comments are requested by July 1, 2019.

 

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