Resources
Proposed quality management standards
FINANCIAL REPORTING INSIGHTS |
Authored by RSM US LLP
On February 4, 2021, the American Institute of Certified Public Accountants Auditing Standards Board issued an Exposure Draft that includes three proposed new standards for quality management at the firm and engagement levels, and proposed related revisions to various other standards for consistency with the new standards.
Proposed Statement on Quality Management Standards (SQMS), A Firm’s System of Quality Management, takes a new approach that emphasizes the responsibility of firm leadership for proactively managing quality by focusing on risks that may impact engagement quality. The proposed standard is scalable for differences in the size of firms and the nature of the services they provide. The proposed standard includes the following highly integrated components of a system of quality management:
- The firm’s risk assessment process
- Governance and leadership
- Relevant ethical requirements
- Acceptance and continuance of client relationships and specific engagements
- Engagement performance
- Technological, intellectual and human resources
- Information and communication
- The monitoring and remediation process
Proposed SQMS, Engagement Quality Reviews, includes requirements for robust policies and procedures addressing the appointment and eligibility of engagement quality reviewers and the performance of engagement quality reviews. Having a separate standard for engagement quality reviews is expected to emphasize the importance of the engagement quality review and that the engagement quality reviewer is acting on behalf of the firm. The requirements for the performance of the engagement quality review will focus the engagement quality reviewer’s attention on significant judgments and significant matters at appropriate points in time during the engagement. The proposed standard also includes an overarching requirement for proper documentation of the engagement quality review.
Proposed Statement on Auditing Standards (SAS), Quality Management for an Engagement Conducted in Accordance With Generally Accepted Auditing Standards, encourages proactive management of quality at the engagement level, emphasizing the importance of the exercise of professional skepticism, enhancing the documentation of the auditor’s judgments and reinforcing the need for robust communication during the audit. The proposed SAS makes clear that the engagement partner has overall responsibility for managing and achieving quality.
The proposed effective dates of these standards would require firms to design and implement a system of quality management prior to December 15, 2023, and to perform the first annual evaluation of the system of quality management within the following year. The performance of engagement quality reviews under the new standard would be required starting with (a) calendar-year 2024 financial statement audits or review engagements and (b) other engagements that begin on or after December 15, 2023. The proposed SAS would be effective for audits of periods beginning on or after December 15, 2023.
Let's Talk!
Call us at (325) 677-6251 or fill out the form below and we'll contact you to discuss your specific situation.
This article was written by RSM US LLP and originally appeared on 2021-02-11.
2020 RSM US LLP. All rights reserved.
https://rsmus.com/our-insights/newsletters/financial-reporting-insights/proposed-quality-management-standards.html
The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.
Condley and Company, LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.
Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.
For more information on how Condley and Company can assist you, please call (325) 677-6251.