ISQM (UK) 1, or the International Standard on Quality Management 1 (ISQM 1), represents a significant change for audit firms.
ISQM 1 replaced the ISQC (UK) 1 in December 2022. The new standard requires a more proactive approach to identifying and managing 'quality risks' which can result in a firm issuing an incorrect audit report. To achieve this, firms must establish and monitor a System of Quality Management (SOQM) which is more comprehensive than existing audit procedures documentation.
HAT Group is an established provider of audit methodologies and compliance documentation for audit firms of all sizes. Many firms already rely on our expertise and practical approach to ensure they comply with FRC quality standards.
Our ISQM pack includes:
The pack is available for £400 plus VAT
The objectives for ISQM 1 standards for most firms include governance and leadership; relevant ethical requirements; acceptance and continuance of engagements; engagement performance, including quality of working papers and financial statements; reliability and effectiveness of resources and service organisation and information and communication, including how the firm’s policies and standards are communicated internally.
These are risks that have reasonable possibility of impacting a firm’s achievement of one or more quality objectives. This formal, firm-wide risk assessment must be documented and is one of the key changes introduced by the standard.
Many responses will be the same as before and covered by the firm’s tailored audit standards. However, some will be new and may be unique to the firm, for example the scheduling of specific training to deal with an area of weakness identified in the firm’s quality risk assessment.
A full annual review is required, and monitoring must occur on an ongoing basis to identify deficiencies or previously unidentified risks via audits and reviews. Monitoring may include, but is not limited to, cold file reviews and related services engagements, where it is expected that firms will take a proactive response to weaknesses identified. Where a weakness is identified, root cause analysis should be performed.