What is the ISQM 1 effective date?
Several years in the making, the new international standards on quality management (ISQMs) are set to be introduced later this year. Let’s look at the ISQM 1 effective date below, which will come into fruition alongside ISQM 2 and an improved version of ISA 220.
- ISQM 1 effective date
- Objectives of the IAASB
- Key differences in the new ISQMs
- Preparing for ISQM 1, ISQM 2 and ISA 220
- Responses to deficiencies
- A modern approach to modern regulations
ISQM 1 effective date
Well, following years of planning, the new ISQM 1 effective date is from 15th December 2022. As stated above, two further regulatory processes will also become effective from the same date – ISQM 2 and ISA 220. Some of the elements found across all three processes will be familiar to those who have worked under the former ISQC guidelines, with the greatest changes occurring within ISQM 1.
For an in-depth look, see our article on what is ISQM 1 – everything you need to know for more information.
Objectives of the IAASB
External auditors and financial reviewers alike may be wondering why the previous ISQC regulatory system is soon to be surpassed. Let’s look to the process creators – the IAASB (International Auditing and Assurance Standards Board) – for an explanation.
The key objective to be gained from launching a new set of standards is a commitment to quality – quality working relationships for employees, quality of service for clients/customers, and consistency of practice found across the auditing world. A clearer commitment to quality should result in a greater level of service provided by both audited businesses and auditing firms alike.
Key differences in the new ISQMs
The greatest changes in the new quality standards can be found in ISQM 1. These changes are a reaction to reoccurring problems found under the old guidelines. The new regulations place a strong emphasis on risk as being key to demonstrating signs of improvement.
If all measurements of quality are risk-assessed, then there should be a greater chance of quality levels being maintained. Furthermore, in events of quality deficiency, a risk assessment can help to identify the underlying problem and reduce the chances of it occurring again.
Preparing for ISQM 1, ISQM 2 and ISA 220
With the new ISQM effective date falling in less than six months, how can businesses and external auditing firms prepare for what will likely be a huge period of adjustment?
As with any great changes made within the guidelines of a review process, there’s no easy answer. There will likely be teething problems for both parties involved in the process, with subsequent years proving less taxing as proven processes can be reused. As it’s easy to get overwhelmed by regulatory changes, it may be worth considering the following:
- Businesses should allocate the management of different processes to different internal employees. Even for smaller businesses, it’s likely that the scope of work required will surpass the capabilities of any individual.
- Auditors should know the new regulations in intricate detail.
- Remember that it’s never too early to start – the new regulations can be followed at any time, and a head-start on the ISQM deadline in December may ensure a more accurate process is followed.
To assist in your preparation, find our post on who the new International Standard on Quality Management (ISQM) 1 applies to. (add a hyperlink to the related blog post)
Responses to deficiencies
A key phrase here is ‘root cause analysis’. No single business is expected to be perfect on all accounts, and deficiencies will be found at some point. The important step for businesses is to perform root cause analysis to discover the specific reason behind a failure or missing process and to implement their findings to ensure a similar instance does not occur again.
Such an approach indicates a greater emphasis on quality management in the new regulations, and companies should be looking to guard against repeat failures by identifying risks to quality. ‘Root cause’ is essential here, as, without careful and explicit analysis of a problem, there’s a greater chance of a repeated failure, which greatly compromises quality management overall.
A modern approach to modern regulations
Feeling ready for the new ISQM regulations? Whatever stage of the journey your firm is currently at when it comes to the ISQM, Inflo software can be the virtual assistant you need.
Utilising digital technology, Inflo can provide your company with clearly mapped-out insights, quality objectives, risk assessment documentation and real-time monitoring. The platform acts as a digital assistant, taking care of routine analytics or manual processes and freeing up time for human auditors to focus on the most interesting aspects of a project.
Over 1000 professional accounting firms are currently reaping the benefits of our easy-to-use platform across 120+ countries worldwide. Given the challenges that naturally come with the introduction of any new compliance regulations, Inflo can help both businesses and accounting firms to devise a quality management system that suits both specific business needs and those of the IAASB.
Contact us today for an entirely new approach to quality management.