International Standard on Quality Management
Significant changes proposed
The International Auditing and Assurance Standards Board (IAASB) seeks public comment by 1 July 2019 on three interrelated standards that address quality management.
The proposals bring important changes to the way professional accountancy firms are expected to manage quality—for audits, reviews, and other assurance and related services engagements.
The proposed standards include a new proactive risk-based approach to effective quality management systems within firms that establish the foundation for consistent engagement quality. The new approach is intended to improve the scalability of the standards because it promotes a system tailored to the nature and circumstances of the firm and its engagements.
The proposed changes are significant and will require firms to adjust how they manage quality, both for the firm and the engagement teams. The revisions will likely require increased effort for most firms. They could also affect firms’ organisational structures and operations. The revisions will also require greater leadership by engagement partners in managing and achieving quality engagements.
The key changes are:
- A new proactive risk-based approach to firms’ systems of quality management in ISQM 1
- Modernising the standards for an evolving and increasingly complex environment, including addressing the impact of technology, networks, and use of external service providers
- Increasing firm leadership responsibilities and accountability, and improving firm governance
- More rigorous monitoring of quality management systems and remediation of deficiencies
- Enhancing the engagement partner’s responsibility for audit engagement leadership and audit quality
- Addressing the robustness of engagement quality reviews, including engagement selection, documentation, and performance
Find out what is changing
A new ISQM 1 (previously ISQC 1) addresses a firm’s responsibility to establish a system of quality management to support quality engagements.
A proposed new standard ISQM 2 addresses engagement quality reviews.
Proposed changes to ISA 220 address the management of engagement quality for audit engagements.
Commenting on the Proposals
You can either respond directly to the IAASB on the Exposure Drafts, or you can share your views with the NZAuASB, in writing or by attending one of our planned outreach events.
If you are aware of New Zealand-specific matters you want the NZAuASB to consider, send your comments—both formal or informal—by 7 June 2019 to the NZAuASB using the online form below.
This is an important opportunity for you to have your say about these international proposals.
The NZAuASB’s strategic objective is to adopt international auditing & assurance standards. Generally, once a standard has been issued by the IAASB, the NZAuASB then issues the New Zealand equivalent standard. This is usually without further consultation, unless compelling reasons have been identified to amend the standard for use here in New Zealand.
So, we also encourage you to send comments directly to the IAASB by 1 July 2019 (with a copy to the NZAuASB). You can use the secure upload form below to send your comments to the NZAuASB.
You can also make your comments direct to the IAASB website (www.ifac.org) using the “Submit a Comment” link. As a first-time user, you have to register with IFAC first to submit electronically.
Upload your submission here
Please use this secure online form.
It has been designed to make your upload safe, quick and easy.
- Upload an MS Word document (and a PDF file, if you wish); or
- Write your comments below in the space provided.
You can upload up to TWO documents.
We would appreciate receiving a copy of your comments in electronic form (preferably Microsoft Word format). This helps us to more efficiently collate and analyse comments. Please also specify the exposure draft number and title in your electronic file.
Tell us on whose behalf you are making the comments (for example on behalf of a group or an entity).
We intend publishing all comments on the XRB website, unless they may be defamatory. If you have any objection to this, we will not publish them. However, they will remain subject to the Official Information Act 1982 and, therefore, may be released in part or in full. The Privacy Act 1993 also applies.
If you have an objection to the release of any information contained in your comments, we would appreciate you identifying the parts of your comments to be withheld, and the grounds under the Official Information Act 1982 for doing so (for example, that it would be likely to unfairly prejudice the commercial position of the person providing the information).