What Are ISQMs and Why Do They Matter to Your Firm?

While everyone has their own opinion of quality management systems, they are intended to bring a set of positive outcomes.

For businesses, proving good quality management shows a clear commitment to setting consistently high standards. And for auditors, quality management systems allow for a clearer assessment of excellence, or indeed it’s the opposite. With huge changes to the auditing profession soon to reach fruition, here we’ll answer what are ISQMs and detail the shift in approach needed when putting them into practice.

 

Contents

  • What are ISQMs?
  • Why do ISQMs matter to your firm?
  • Preparing for the New Quality Management Standards: ISQM 1 Quality Objectives and Quality Risks
  • ISQM news and updates

 

What are ISQMs?

‘ISQMs’ stands for ‘international standards on quality management’. There are two standards being introduced – ISQM 1 and ISQM 2. The standards were created by the IAASB (International Auditing and Assurance Board, and replaced ISQC (International Standard on Quality Control).

The key change here is the shift from ‘quality control’ to a system of ‘quality management’. The current standards are more of a reactive approach to quality, dealing with problems and inconsistencies as they happen. The new standards are an attempt to address potential problems before they occur, by identifying risks that may encroach upon a business’s capability to deliver a quality service to its employees or customers.

ISQMs will potentially revolutionize the auditing industry and drive up the quality performance of the companies it deals with. In theory, quality levels should be greatly improved by the new standards. See our post on the ISQM 1 implementation timeline for more information.

Why do ISQMs matter to your firm?

Firstly, ISQMs matter to business leaders as they’re a direct indication of quality service. Put simply, delivery of quality service is a hugely important ingredient in the race to be successful.

Secondly, for external auditors, the ISQMs offer the potential for audits to be carried out in a more consistent fashion. Potential problems in the pursuit of quality should be identified by a business in advance, giving auditors a clearer picture of that company’s strengths and weaknesses.

A clearer system can also help promote a greater sense of trust for both the business and the auditor, which should transfer down to clients and customers alike.

 

Preparing for the New Quality Management Standards: ISQM 1 Quality Objectives and Quality Risks

All those working within the auditing or reviewing of financials sector should be well-prepared for the big changes to come, given the shift to quality management has been in the pipeline for several years. At least in part, the change in regulations has arisen due to the previous standards being less effective than desired when it came to using them as a measurement of quality. A shift to risk-based assessments is hopefully the key to a more robust auditing system.

It’s also worth noting that the new standards – especially ISQM 1 – will require a shift in philosophy for those working on the front line. Auditors will no longer be able to apply the same principles from business to business, as no two businesses are exactly the same.

Size, industry, location and growth strategies are all points of difference that may require different risk assessments, in order to govern quality management. To carry out their work most effectively, auditors will likely need to understand a specific business on the same level as its CEO and employees.

 

ISQM news and updates

With the switch to the new ISQM standards coming on December 15th, 2022, businesses and auditing firms alike have several months left to prepare. It’s strongly advised that companies undertake a phased approach, breaking down their processes one by one and identifying specific risks to quality, as opposed to making things too generic. For objectives and key differences to be found in the new standards, see our article on when are ISQMs effective from.

 

If auditors are concerned that a shift in standards will result in a higher workload, they could well be right – at least for the first few years. Here’s where Inflo software can help, utilizing digital technology, Inflo acts as an assistant, taking care of routine manual processes, mapping out insights, risk assessments and quality objectives. With Inflo on your team, auditors are free to focus on the most rewarding parts of their role – not to mention getting to grips with the new regulations.

Contact us today for an entirely new approach to quality management, and check back for regular ISQM news and updates.

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