December 15th, 2022, marks the introductory date of the new international standard on quality management. Aimed at improving quality management through risk assessment, combined with a system better tailored to the individual needs of a specific firm, let’s look into who the standards will affect and the changes needed below.
The new international standard on quality management is the responsibility of the IAASB (International Auditing and Assurance Standards Board). The IAASB works under the guidance of the IFAC (International Federation of Accountants).
The IAASB is committed to quality and sets the international standards for auditing and assurance.
The organisation ultimately aims to improve global accounting and reinforce trust in both this and auditing services in general.
The new standards will come into force in December 2022, replacing the ISQC (International Standards of Quality Control). Regulations will include three sections: ISQM 1, ISQM 2, and a revised ISA 220 (International Standard of Auditing).
The new international standards on quality management seek to increase levels of quality by identifying and managing risk. Wherever there are potential hurdles to carrying out a particular procedure successfully, a risk assessment needs to be put in place, so firms are able to operate with a philosophy of continuous improvement.
The new ISQM is relevant to all external auditors who perform audits or reviews of financial statements under International Standards on Auditing (ISAs). There is a greater onus on business leaders to accept greater responsibility for quality management from the top downwards. Setting a positive company culture has an impact on quality throughout an organisation, from levels of employee satisfaction to managing internal and external relationships.
‘Risk’ is a keyword when it comes to analysing the changes between the ISQC and ISQM. Instead of outlining specific procedures, the ISQM looks at proving quality through risk-based assessments. Procedures should be integrated with risk in mind. Policies introduced to manage risk are thus an indicator of a commitment to providing a quality service.
See our article for an in-depth look at what is included in the new quality management standards.
When we look at who is affected by the new standards in the UK, they apply to firms of all sizes. This will include firms that conduct audits, reviews, or other assurance engagements. Anyone working within the auditing sector should take time to understand the new policies and changes set to go through. In-depth guides can be found on the IFAC website regarding ISQM 1 and ISQM 2.
Firms should begin by identifying the areas of quality management found in ISQM that are relevant to their audit practice. Existing quality management procedures should be analysed, and any threats to procedural failure are identified as risks. It’s important that firms look at both in-house and external procedures in order to make an assessment when it comes to overall quality.
In the long run, the new standards offer both firms and auditors a clearer, more streamlined opportunity to manage quality. And a higher level of quality both inside and outside a set organisation has positive connotations for a business as a whole.
For more information, see our post on why do we need new quality management standards?
No matter what stage your business is at when it comes to complying with the ISQM, Inflo software can save you time, money and audit-era headaches. Utilising digital technology, Inflo can provide your company with clearly mapped-out insights, quality objectives, risk assessment documentation and real-time monitoring.
