Audit and quality management: ISA 220, ISQM 1 – part 2

In the second part of our series on reforms to auditing standards, Katharine Bagshaw FCA examines proposed changes to ISA 220 Quality Management for an Audit of Financial Statements and the introduction of the first quality management standard for auditors, ISQM 1, currently out for consultation by the International Auditing and Assurance Standards Board (IAASB)

ISQM 1

The main proposed change in ISQM 1 International Standard on Quality Management 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, is the need for an eight-component system of quality management.

Many of the elements of that system will already be in place, but thinking about it as a system, and evidencing its operation as such, will be new.

The eight components are:

(1) governance and leadership, covering culture, decision-making, organisational structure and leadership;