by John McCarthy Consulting Ltd. | Jun 18, 2026 | Blog, News
The ISQM 1 regime is now fully in place since its initial roll out in 2021. Every Irish audit firm will need an ISQM-compliant System of Quality Management (‘SOQM’).
Many firms have already prepared their ISQM 1 policy statement (called the Statement of Quality Management or SoQM), but have you reviewed yours in accordance with the standard on an annual basis since its initial implementation.
Our ISQM TOOLKIT is the answer to your needs and is available to purchase now for immediate download to help you. Click here for more details.
Regulators are looking for clear evidence of progress with the application of the standard and especially with evidence of root cause analysis (RCA).
Here are our top ten tips to helping you get your SOQM across the finish line:
- Read the ISQM. There’s really no way around this!
We’d recommend you also get hold of the IAASM Implementation Guide, which is genuinely helpful – although be warned; this is for the international version of the ISQM and doesn’t include the additional quality responses added to the Irish standard by the Irish Audit & Accounting Supervisory Authority (IAASA).
- Assess your current approach to audit quality. Firms have various audit quality policies and procedures already in place. While we want to stress that you shouldn’t simply ‘bolt on’ ISQM to your existing approach, it’s helpful to get a clear insight into what’s happening now (e.g., by taking a look with a critical eye at your existing procedures and matching them to the requirements of our ISQM Toolkit).
This may mean gathering various documents (like staff appraisals, CPD plans and IES 8), clarifying existing arrangements with the rest of the audit team and organising your thoughts.
- Find out what your team thinks about your current approach. Chances are, you and your team already have sound insights into what’s working well and what isn’t, and some honest feedback may be painful but is essential to making progress.
John McCarthy Consulting Ltd. (working in conjunction with our colleagues in Apex Professional Consulting Ltd.) has produced the ISQM TOOLKIT for the Republic of Ireland. It comes with a unique team questionnaire that can help you to gather anonymous feedback including suggestions for tackling problem areas.
- Start with leadership and governance issues. For most if not all small firms, a critical success factor for ISQM compliance is the degree of support from partners, especially managing partners within firms.
Whether your firm is a sole practitioner or a larger firm, ISQM 1 challenges senior leadership to demonstrate genuine commitment to audit quality, recognising that this may not always align with a firm’s commercial strategy or its leaders’ priorities. You need to identify and deal with those conflicts, if present. You’ll also need to consider how much of the SOQM can be delegated to others and how the firm’s leadership will demonstrate that they bear ultimate responsibility for its success.
5. Don’t dismiss the appointment stage. Many firms assign consideration of (re)appointment to junior audit staff who lack the judgement to assess ethical threats and to apply the right safeguards. Accepting a client relationship or engagement inappropriately removes any chance to achieve a quality audit.
6. Be honest about priorities. Many firms say that they’re committed to audit quality, but a cursory scrutiny about how much of the firm’s time and money is spent in supporting and developing high quality audit may suggest otherwise. ISQM 1 demands that firms allocate enough resource to recruit and develop audit teams, supply them with appropriate tools (including hardware and software) and allow them the time to conduct audits thoroughly. You’ll also need to assess the quality risks of over-relying on external training providers, file reviewers or providers of methodology or IT tools.
7. Refocus on prevention rather than cure. In the past, many audit firms have relied on regular cold file reviews to ensure their quality is up to scratch. Whilst such reviews will still play a key role, firms need to consider how to avoid audit defects altogether. For many audit partners, this may mean reducing the amount of time spent in review, and increasing the time spent in directing and supervising audits whilst in progress. Better prepared and managed teams should produce better audit files that need less review and remediation.
8. Plan your monitoring as you go. As you set out your SOQM, make sure that every element is trackable and assign responsibility for monitoring to specific individuals, with clear instructions about how they should check progress and how they must record this. This should make the ‘monitoring and remediation’ part of the process much less burdensome. Don’t leave it all until the end!
9. Get familiar with Root Cause Analysis (‘RCA’). This is a tool that has increased in profile of late, and while RCA can be sophisticated, it needn’t always be so. The aim is to identify systemic defects that, if corrected, will prevent problems from recurring. Don’t be afraid of asking ‘why did X happen’ multiple times when a quality problem is spotted, until the roots are uncovered.
10. Consider external support. Whilst it’s possible to implement ISQM 1 without any other support, especially if you use a good transition tool you may find that getting the assistance of a specialist can be hugely valuable, even if just as a sounding board.
If you need assistance with implementation, or have any questions please contact John by e-mail john@jmcc.ie.
The ISQM TOOLKIT is available here to purchase now for immediate download.
All the templates on our website have had a refresh as of June 2026 and the letters of engagement have had new paragraphs added for:
- the potential use of artificial intelligence and machine learning on client assignments;
- along with auto enrolment for payroll assignments.
There is a bulk discount (five templates for the price of four) for purchases of five or more templates when purchased in a single transaction.
If you need an up-to-date engagement letter, there is a search bar near the bottom of our home page (www.jmcc.ie) to quickly look up the item you need. More details see here.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor our training and brainstorming sessions to suit each firm’s unique requirements.
Publications:
All the templates on our website have had a refresh as of June 2026 and the letters of engagement have had new paragraphs added for:
- the potential use of artificial intelligence and machine learning on client assignments;
- along with auto enrolment for payroll assignments.
There is a bulk discount (five templates for the price of four) for purchases of five or more templates when purchased in a single transaction.
If you need an up-to-date engagement letter, there is a search bar near the bottom of our home page (www.jmcc.ie) to quickly look up the item you need. More details see here.
For those of you still in the process of reviewing your ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor our training and brainstorming sessions to suit each firm’s unique requirements.
Publications:
by John McCarthy Consulting Ltd. | Jun 18, 2026 | Blog, News
Once upon a time it was possible to have the same client engagement letter in place for several years, without too much upset.
However, the pace of change in the various pieces of overlapping legislation that impact on engagement letters, seems to be getting faster and faster. Different obligations under criminal law, tax law, company law and anti-money laundering that are now required in the typical contract with your client, mean that there is a never-ending requirement to review your letters and issue revised and updated letters to your clients on an annual basis.
Here is a quick checklist of the legislation you need to include in audit engagement letters:
| Topic |
Legislation |
| Company law |
Companies Act 2014 |
| Criminal law
|
· Section 59 Criminal Justice (Theft and Fraud Offences) Act, 2001 and 2021
· Criminal Justice Act 2011 |
| Tax law |
Section 1079 Taxes Consolidation Act, 1997 |
| Anti-Money laundering/terrorist financing |
Criminal Justice (Money Laundering and Terrorist Financing) Acts, 2010 to 2021 |
| Data Protection |
Data Protections Acts 1988 to 2018 and the GDPR |
All the templates on our website have had a refresh as of June 2026 and the letters of engagement have had new paragraphs added for:
- the potential use of artificial intelligence and machine learning on client assignments;
along with auto enrolment for payroll assignments.
If you need an up-to-date engagement letter, there is a search bar near the bottom of our home page (www.jmcc.ie) to quickly look up the item you need. More details see here.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor our training and brainstorming sessions to suit each firm’s unique requirements.
Publications:
by John McCarthy Consulting Ltd. | Jun 18, 2026 | Blog, News
Under the code of ethics of the professional accountancy bodies, it is mandatory for accountancy practices, when taking on a new client or renewing the professional relationship with an existing client, to obtain a signed letter of engagement setting out the terms of the business agreement and contracted services. This blog highlights the top ten of engagement letter contents. More tips to follow in future blogs.
What needs to be included in a letter of engagement?
The best written letters should include the following:
- Cover letter/key facts;
- Standard terms of business/limitation of liability (except for audit work in the RoI);
- Reference to the appropriate accounting framework such as IFRS, FRS 102 or FRS 105;
- Audit;
- Accountant’s reports (i.e. for audit exempt and unincorporated entity assignments);
- ‘Agreed upon Procedures’ such as under the International Federation of Accountants ISRS 4400 where an auditor simply provides a report of the factual findings of agreed-upon procedures and where no assurance is expressed. Users of such reports assess for themselves, the procedures and findings which are reported by the auditor and draw their own conclusions from the auditor’s work;
- Accounting services e.g. accounts production, management accounting, bookkeeping;
- Taxation services;
- Other services e.g., payroll (including auto enrolment), VAT returns, company secretarial services;
- Specialist reporting assignmentsg. Central Bank requirements for insurance brokers and the Accountants’ Report to the Law Society under the Solicitors Accounts Regulations, 2023.
All the templates on our website have had a refresh as of June 2026 and the letters of engagement have had a new paragraph added for the potential use of artificial intelligence and machine learning on client assignments along with auto enrolment for payroll assignments. There is a bulk discount (five templates for the price of four) for purchases of five or more templates when purchased in a single transaction.
If you need an up-to-date engagement letter, there is a search bar near the bottom of our home page (www.jmcc.ie) to quickly look up the item you need. More details see here.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor our training and brainstorming sessions to suit each firm’s unique requirements.
Publications:
by John McCarthy Consulting Ltd. | Jun 12, 2026 | Blog, News
Part one of this two-part blog appeared last week where we looked at how best to tighten the language used in tax and other engagement letters to help minimise liability and improve communication with clients.
Below we discuss the main elements of the improved additional wording that might be inserted into tax engagement letters. The points discussed may be applied to all types of engagement letter, with minor tweaks.
Exclusion clause. Because tax services can be broad, an exclusion clause that identifies what services will not be provided is invaluable. For example, a payroll taxes preparation engagement might exclude subcontractor tax and VAT compliance.
Deadline for submitting return information. Clearly state the deadline by which the client must provide the information needed to prepare the tax return.
Limitation on use of the returns. Clients may submit tax returns and/or supporting data (like rental income computations) to named third parties in lieu of a financial statement. It is essential to limit potential liability by naming those third parties and include a clause limiting the circulation of tax returns, supporting data and distribution and/or requiring advance written permission before allowing the client to circulate the information to those named third parties.
Tax position clauses. Often it can happen that clients think a certain approach is acceptable, but this may often conflict with professional standards. Include language stating that tax positions taken must satisfy professional and ethical standards.
Supporting documentation. Because a Revenue Audit or investigation is always a possibility, remind clients of their responsibility to maintain adequate records to support the deductions claimed on the return. Include in the letter a reminder of the length of time for which the records should be maintained.
Revenue Audit or Investigation. Representing a client in a Revenue Audit may be more involved than the tax return preparation itself, for which many accountants may want to deal in a different manner to the main tax assignment e.g. by allowing for the use of specialist advice. The engagement letter should state that in the event of a Revenue Audit or Investigation, the assignment will be covered by the terms of a separately signed engagement letter.
Outcome or results. The engagement letter is not a marketing device. Never guarantee the outcome or results.
Limitation of liability. Ensure such clauses are used appropriately.
Complaints/best service. Make it clear what the lines of communication are, in the event of a dispute or claim (by giving the contact name for the Partner/Director in your organisation that will primarily handle client complaints) and in the event of failure to reach a satisfactory outcome give the contact details of your professional body.
If you need an up-to-date engagement letter, there is a search bar near the bottom of our home page (www.jmcc.ie) to quickly look up the item you need. More details see here.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor our training and brainstorming sessions to suit each firm’s unique requirements.
Publications:
by John McCarthy Consulting Ltd. | Jun 7, 2026 | Blog, News
Tightening the language used in tax and other engagement letters will help limit your professional liability. This is part one of a two-part series of blogs on tax engagement letters.
Accountancy firms are taking a renewed interest in having well written and up to date engagement letters. In this blog we outline the fundamentals of best practice in tax engagement letters, and we suggest provisions that will help minimize legal liability faced by accountants in practice.
Professional liability insurers and defence solicitors will often agree that engagement letters are one of the first lines of defence in a professional negligence claim against an accountant. When drafted properly, engagement letters form the basis for an enforceable contract and should contain:
- caveats unique to the scope of the service provided
- state the amount of risk inherent in the engagement, and
- ensure that professional standards are met.
Over the years, in our experience, the majority of claims (by frequency) reported by leading professional indemnity insurers arise from tax services, yet individual tax engagements are where engagement letters are hardly ever used.
General Principles for all Engagement Letters
The following ten general principles apply to almost all types of engagement letter.
- Address the letter to the appropriate parties in a formal introductory paragraph.
- Exclude any taxes not within the scope of the tax return
- Exclude other entities owned by the individual tax client, if dealt with elsewhere.
- Include the appropriate year or years that are being prepared.
- Identify which returns are being prepared, and do not combine multiple returns. (For example, do not include a gift tax return service with an income tax return unless the proper disclaimer language for a gift tax return is included.) The following language is highly recommended.
‘We will prepare your [Year] income tax return. This engagement pertains only to the [Year] tax year, and our responsibilities do not include preparation of any other tax returns that may be due to any tax authority. Where we receive specific instructions from you about other taxes or other tax years, these assignments will be the subject of separate engagement letters. ‘
- Deal with the price of the service, payment terms, retainers, additional charges for information received late, additional fees.
- Clarity and diligence must be adhered to, as many professional liability lawsuits, professional body ethical complaints, and loss of clients have resulted from misunderstanding these provisions. Too often, a phrase like the following is used in a standard letter:
‘Our fee for services will be at our standard hourly rate for the personnel assigned to this engagement [or fixed fees to cover other than hourly fee arrangements]. Payment is expected when our services are complete.’’ This is far too vague and uncertain.
- The following improvements to the wording will help a lot:
- Specify more clearly the payment terms.
- If you wish, stipulate that a retainer will be required and will be applied toward the final fee and that the retainer is not an estimate of the fee charged for services.
- Identify when payment is expected.
- Provide for a termination of services if the fee is not paid in full.
- Use an additional charge clause for services not originally contemplated.
- Include a provision for reimbursement for out-of-pocket expenses such as travel, registered delivery, etc.
- Use a tax checklist that is sent to clients. The value of tax checklist in defending a professional liability claim cannot be overstated. However, many tax advisers complain that their clients do not complete the checklist and often return it unopened.
Accountants and tax advisers need to get the client to take responsibility for completing the checklist. The language used in the engagement letter should establish this responsibility:
‘We will prepare the returns from information which you will furnish to us. It is your responsibility to provide all the information required for the preparation of complete and accurate returns. We will furnish you with questionnaires and/or worksheets as needed to guide you in gathering the necessary information. Your use of such forms will assist us in keeping our fee to a minimum. To the extent we render any accounting and/or bookkeeping assistance, it will be limited to those tasks we deem necessary for preparation of the returns’.
- AI – include an appropriately worded paragraph in the letter of engagement informing clients about the potential use of artificial intelligence in carrying out tax assignments. All our template engagement letters on the website have been updated with such a paragraph about AI.
More next week on the style of improved wording that a tax engagement letter might contain.
If you need an up-to-date engagement letter, there is a search bar near the bottom of our home page (www.jmcc.ie) to quickly look up the item you need. More details see here.
For those of you still in the process of ISQM 1 implementation, please see our ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at john@jmcc.ie.
We typically tailor our training and brainstorming sessions to suit each firm’s unique requirements.
Publications:
