The AICPA on September 26 finalized their long-anticipated resource to assist with implementation of the new System of Quality Management Standards. The practice aid materials were released on October 2.
New Quality Management System Mandate
SQMS No.1, issued in June 2022, requires all firms with an Audit & Accounting practice to implement a new system of quality management by December 15, 2025. This not only includes firms which perform audits, but firms which perform any A&A engagements including audit, review, compilation or preparation engagements. Thus, virtually ALL firms will have to update their systems and the changes are significant. This new standard replaces the old control document required by SQCS No. 8 and increases the required components from six to eight, adding “Risk Assessment” and “Information and Communication”.
The goal is to improve overall firm quality and places emphasis on a new risk-based approach to design, implement and operate a system of quality management. However, at 80 pages in length, the standard can be quite daunting.
Quality Management System Implementation
To assist with the implementation, the AICPA has created an AICPA Practice Aid “Establishing and Maintaining a System of Quality Management for a CPA Firm’s Accounting and Auditing Practice,” which is available for free to members on their website. This practice aid includes two versions: one for sole practitioners and one for small to medium sized firms, along with a spreadsheet example for risk assessment.
The practice aid is laid out as follows:
- An overview of the standards as well as the eight components;
- Coverage of the risk assessment requirements;
- A comprehensive library of quality objectives, potential risks and potential responses. (This may be used in conjunction with the provided spreadsheet tool);
- Proper monitoring and remediation, including policies and procedures; and
- An appendix, which reproduces the actual Quality Management Standards for easy reference.
Note: the resource is a PDF with interactive drop menus to assist with the risk assessment for each area. In theory, this could be used on its own or in conjunction with the spreadsheet.
While this resource will not do your work for you, it will significantly increase your understanding of the requirements and should tremendously decrease the time and effort required to create your own personalized system. It should also eliminate the need to buy a third-party practice aid.
This resource can be found at the AICPA website under Resources for Audit and Attestation located HERE – you will need to sign in to gain access.
Stay tuned for a webcast coming soon with Western CPE expert instructor Jeff Sailor where he will walk you through the process of using the resources. In the meantime, if you have any questions regarding this resource or any other A&A topic, Jeff can be reached at firstname.lastname@example.org.