ISQM 1 replaces ISQC 1. Meanwhile, ISQM 2 is a brand new standard; but many elements have been relocated from other standards such as ISQC1 and ISA 220.
ISA 220 (Revised) is an updated version of the existing ISA 220 standards.
ISQM
Standards for Quality Management in Auditing and Reviews of Financial Statements.
In September 2020, two new International Standards on Quality Management, ISQM 1 and ISQM 2, together with a revised version of International Standard on Auditing 220 were approved. These replace the current quality control standard (ISQC1) and the existing version of ISA 220. The ISQMs are designed to create a more robust, proactive and effective system for quality management.
Mercia's Quality Management Manual can help firms implement the ISQMs effectively.
On this page:
Introduction to ISQMs
Following a series of high-profile audit failures, the International Auditing and Assurance Standards Board’s (IAASB) has updated the Quality Management standards.
The International Standards of Quality Management (ISQMs) are designed to fix inefficiencies in the current standards. More focus is placed on proactive responses to quality management issues. The impact of ISQMs mean that professional accountancy firms will need to change the way they handle quality management. In particular when it comes to audits, reviews, and other assurance and related services engagements.
What are ISQMs?
ISQM stands for International Standard on Quality Management (ISQM). There are two ISQMs:
- ISQM 1 - aims to enhance the robustness of a firm's quality management systems
- ISQM 2 - deals with the appointment and eligibility of the engagement quality reviewer
These are supplemented by ISA 220 (Revised) - specifically for auditing firms, which handles the specific responsibilities of the auditor on an audit engagement.
The standards place greater responsibility on a firm’s leadership for continuously improving the quality of their engagements and taking remedial action when deficiencies are found. The standards should help ensure that a commitment to quality is at the heart of a firm’s strategy and operations.
When are ISQMs effective from?
The ISQMs were officially approved in September 2020 with the standards released in December 2020.
The three new standards came into effect from the 15th December 2022.
To help your audit firm implement the ISQMs, Mercia has created an extensive Quality Management Manual. This tool highlights over 100 different potential Quality Management risks and responses for them.
Designed to suit any size firm, the Mercia Quality Management Manual makes preparing for ISQM easy.
ISQM Implementation - Quality Management Manual
Need help getting started with ISQMs?
In order to help your firm be ready for ISQMs, Mercia has put together an extensive Quality Management Manual.
Access to over 100 potential risks all comprehensively catalogued. All risks are rated and include example risk mitigation procedures which your firm can put in to place.
Use the Quality Management Manual to get your firm ready in time for ISQM.
Out Now
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100+ Risks Catalogued |
Over 100 potential quality risks which your firm could face. Each with recommended actions to reduce the risk which you can adapt for your firm. |
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Easy-to-use |
Choose between Excel Spreadsheet or PDF version. Risks are broken down into simple topic areas for ease of use. |
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Suitable For All Firms |
The Quality Management Manual identifies key risks regardless of whether you are a sole-practitioner or a large firm. |
ISQMs: Key Questions
Our Auditing Experts answer key questions regarding the new ISQMs.
The ISQM applies to all firms performing audits, reviews of financial statements or other assurance or related services engagements.
Firms are advised to start preparing for ISQM as soon as possible.
Mercia have created a comprehensive Risk Assessment Tool to help you design effective policies that meet the new ISQM standards.
The Risk Assessment Tool includes over 100 possible quality management risks and effective methods to reduce any risks.
Mercia also has a range of training courses to help prepare for ISQM implementation.
ISQM became effective from the 15 December 2022.
To comply with ISQM, you will need to keep a record of your service providers Quality Management procedures.
For Mercia members, we have put together a document outlining our current internal Quality Management Procedures in:
- Training
- Peer Reviews
- Technical Queries
- Publications
- and more...
ISQMs: Training Courses
Explore our portfolio of related training on ISQM
Available Now
ISQM 1 Practical Application
This course is for individuals who have responsibility for the firm's system of quality management (SOQM)
Available Now
Root Cause Analysis
An introduction and guide for audit principals
Available Now
Audit Update and Topical Issues
Includes a useful summary of ISQM (UK)1 and ISQM 2
Available Now
Accounting and Auditing Quarterly Updates
Each quarter will include a different aspect of the ISQMs
Available Now
ISQM 2 – Engagement Quality Reviews
ISQM 2 including how it links to the requirements of ISQM 1
Available Now
ISQM 1 – What's Next
This course is part of our new Bite Sized range of courses designed to fit into a busy working day.
Available Now
ISQM 2 – Evidencing the Review
This course is part of our new Bite Sized range of courses designed to fit into a busy working day.
ISQM Post Implementation Reviews
Now offeringIs your firm ISQM 1 compliant? Our experienced team can help you review your Whole-Firm Audit Risk Assessment.
Mercia’s review assesses your firm’s responses and procedures and includes a full written report and practical guidance to help you address any compliance areas as required.
Related Articles on ISQMs
Web articles on the ISQMs are available below:
ISQM 1 - Implementing Quality Management Procedures
How should your firm begin the implementation of ISQM policies and procedures? What are the the ongoing monitoring remediation and evaluation of their effectiveness? We explore what firms need to do to get ready for ISQM.
How to move from ISQC (UK) 1 to ISQM (UK) 1
Transitioning from ISQC (UK) 1 to ISQM (UK) 1 is about moving from a standard that state the matters to be addressed in a firm’s procedure. To one that specifies a risk assessment process as a driver of the content of those procedures.
How to approach implementation of ISQM (UK) 1
ISQM (UK) 1 requires the firm to design, implement and operate a system of quality management. Doing so requires the exercise of professional judgement. This needs to take into account the nature and circumstances of the firm as well as the engagements it performs.
ISQM: Preparing for the new Quality Management standards
15 December 2022 is a date that should be at the forefront of every senior auditor’s mind at present. This is the date that the new quality management standards come into force. And if you haven’t started preparing for their introduction already, you need to start now.
ISQM Preparation Support
Get Advice and Support for getting your firm ready for ISQM
