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ISQM (UK) -1 Understanding the Basics

We are getting lots of questions about the new Quality Management Standards and actions firms should be taking:

What is the objective of ISQM (UK) 1?

ISQM (UK) 1 replaces ISQC (UK) 1. Both standards aim to ensure that your firm has appropriate policies and procedures to support R.I.s and others to produce effective and compliant audit files.

When is ISQM (UK) 1 effective from?

Firms must update their policies and procedures to comply with the new standard by 15 December 2022. This is a ‘dead date’ and applies to all firms regardless of the number of audit clients or their year-ends.

How is ISQM (UK) 1 different to ISQC (UK) 1?

ISQC (UK) 1 is a reactive standard, requiring firms to act when a significant problem is identified. ISQM (UK) 1 is proactive, requiring you to perform a risk assess to identify and prevent problems from occurring. This process results in the firm establishing a System of Quality Management (SOQM).

What is a SOQM?

A System of Quality Management (SOQM) is a set of policies and procedures which provide your firm with reasonable assurance that:

  • The firm and its personnel fulfil their responsibilities in accordance with professional standards and applicable legal and regulatory requirements and conduct engagements in accordance with such standards and requirements; and
  • Engagement reports issued by the firm are appropriate in the circumstances.

What action should I be taking now?

It is vital to understand the requirements of the standard and determine how you will achieve these in good time before 15 December 2022. Once you understand the key requirements of the standard you must then identify the Quality Risks which may adversely impact the objectives of your SOQM and then determine the actions required to mitigate these risks.

How can HAT help?

We have just released our new Audit Regulatory and ISQM Procedures Pack which provides pro-forma ISQM (UK) 1 procedures and other documentation including a simple to complete risk assessment. This is included in all audit membership packages with us. We are also providing training for Audit Compliance Partners and an example risk assessment. If you are not a member firm you can still access all of this for a one off fee of £400 plus VAT.