Establishing Quality Objectives for the ISQM

by John McCarthy Consulting Ltd. | Oct 3, 2022 | Blog, News

Six of the eight components have mandatory quality objectives established in the International Standard on Quality Management (ISQM) 1 (see paragraphs 25-34 of ISQM 1). For assistance with implementing the ISQM see our ISQM TOOLKIT available for immediate download here. There is 20% off for simultaneous purchases of five items or more.

There are no mandatory objectives for the two remaining areas:

• risk assessment or
• monitoring and remediation.

Smaller firms may find that the quality objectives already included in ISQM 1 are sufficient for their needs, but some firms may need to establish other objectives or sub-objectives. Every firm must consider (and evidence they considered) whether they need additional objectives – it’s not safe just to assume you don’t need them.

Note that if a quality objective included in ISQM 1 is not relevant to your firm then you can ignore it.

The next step is to identify quality risks that threaten the achievement of those quality objectives:

• Consider
  • the nature and circumstances;
  • the conditions and events;
  • the actions and inactions; and
  • the type and nature of the client engagements.
• Much of a firm’s nature and circumstances is dictated by:
  • the people working there;
  • the environment within which it operates; and
  • the types of client it serves.

All of the above variables may have an impact on the quality risks that are most relevant to the firm, and each firm will need to assess the significance/likelihood of those risks crystallising.

The emphasis will need to be on identifying quality risks rather than focusing on the consequences of a risk crystallising – e.g.

• not understanding the requirements of the Ethical Standard is a quality risk;
• rather than a breach of the Ethical Standard which would be a consequence of that quality risk

Watch out that where you identify a quality risk that doesn’t result from a quality objective in ISQM 1 then you will need to establish a new quality objective.

Next week we will look at assessing risks.

It’s impossible to cover everything in this brief blog. For more assistance please see our new 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

Publications and AML webinar

• The ISQM TOOLKIT 2022 is available to purchase here.
• See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
• Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
• To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.

Are You Ready For The ISQM?

by John McCarthy Consulting Ltd. | Sep 11, 2022 | Blog, News

There are several new acronyms for auditors in Ireland to grapple with before Christmas. From 15 December 2022 the International Standard on Quality Management (ISQM) 1, issued by the Irish Audit & Accounting Supervisory Authority, comes into force. The ISQM TOOLKIT is available here to purchase now for immediate download.

It is and deals with the quality management of audits with special emphasis on:

• designing, 
• implementing and 
• operating 

a system of quality management (SOQM) for audits or reviews of financial statements or other assurance or related services engagements.

It will have a deep and lasting impact on all audits carried out in Ireland, whether they are of public or private companies. Early preparation, well before 15 December 2022, is highly recommended.

The new standard requires audit firms to be much more proactive than the predecessor document the International Standard on Quality (ISQC) 1, which was more reactive in nature.

Among the changes in terminology and acronyms, the main ones are:

• IUR = Individual assigned with ultimate responsibility for implementation assigned ultimate responsibility and accountability for the system of quality management, on behalf of the firm, evaluates the system of quality management and concludes whether the system of quality management provides the firm with reasonable assurance that the objectives of the system are being achieved.
• IOR = Individual assigned with overall responsibility for the audit engagement – usually the engagement partner.
• SOQM = Systems of Quality Management is the overall description for the eight main areas prescribed by the standard.
• RCA = Root Cause Analysis – identification of the root causes of audit deficiencies which is an iterative and non-linear evaluation. It is part of the monitoring and remediation process – see below.
• EP = engagement partner.
• KAP = for an audit of financial statements, the engagement partner is the key audit partner.

The standard is broken into eight main areas:

1. The firm’s risk assessment process;
2. Governance and leadership;
3. Relevant ethical requirements;
4. Acceptance and continuance of client relationships and specific engagements;
5. Engagement performance; 
6. Resources;
7. Information and communication; and
8. The monitoring and remediation process.

The IAASB in New York (from where the standard emanates) have issued a very useful Factsheet that explains the background to the changes.

Over the coming weeks we will publish a series of blogs, in advance of the publication of our new Audit Quality Control Manual called the ISQM Toolkit, to help auditors implement the new process. The Manual will be published soon. Watch this space!

Publications and AML webinar

• The ISQM TOOLKIT is available here to purchase now for immediate download.
• See our latest Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
• Also we have an updated AML webinar (March 2022) available here, which accompanies the AML Manual. It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox.
• To ensure your letters of engagement and similar templates are up to date visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.