Finalisation of Quality Management Standards

The release is comprising the following:

• ISQM(UK) 1 Quality management for firms that perform audits or reviews of financial statements, or other assurance or related services engagements
• ISQM(UK) 2 Engagement quality reviews
• ISA(UK) 220 Quality management for an audit of financial statements

In a blog earlier this year we set out how these new standards will change the way auditors will need to amend their approach to managing quality – you can find details here.

As expected in finalising the standards there is very little change from what was set out in the earlier draft versions. These are limited to two areas of note. The first addresses an inconsistency in the draft version of ISQM(UK) 1 that affects firms where the managing partner or chief executive is not a statutory auditor, which has been changed to now make clear that in such a situation ultimate responsibility and accountability for the system of quality management would need to be assigned to the firm’s managing board, of which at least one member would need to be eligible for appointment as a statutory auditor. The second change is to clarify that firms are required to undertake monitoring procedures to ensure that the monitoring and remediation process in place is achieving its purpose.

The FRC has confirmed that there will be no change to the proposed date of implementation of the three standards, which have an effective date of 15 December 2022.

The finalised standards can be obtained from the FRC website, as can the accompanying Feedback Statement and Impact Assessment.