In autumn 2022, the ISQM 1 implementation deadline was looming and many firms were racing to finalise their Systems of Quality Management (SOQM), double checking to make sure that their objectives, risks and responses were all appropriately articulated (objectives), identified and assessed (risks), and designed and implemented (responses).

A year later, many firms were once again racing, but this time to get their first ISQM 1-compliant internal monitoring completed to make their annual declaration. With the deadline met, we may have believed that quality management (QM) implementation was behind us.

Well, not necessarily. There are a variety of SOQM issues that firms (and individuals) may be facing now – some new and some that haven’t gone away. 

Quality management fatigue

It is easy to understand how some may succumb to ‘quality management fatigue’. Put simply, QM fatigue is a mindset where individuals within a firm become overwhelmed by what may feel like constant QM focus and pressure and, consequently, start to disengage. The artificial sense of ‘this is complete’ that might have been created by the focus on the deadlines in 2022 and 2023 could be a contributing factor. 

Such disengagement could, eventually, lead to corner-cutting and missed red flags across a range of elements in an SOQM. Perhaps most significantly, QM fatigue could undermine strong work performed by firms relating to improving firm culture. This would be a real missed opportunity. 

Firms that believe QM fatigue could be an audit quality risk (possibly impacting a range of quality objectives) will need to assess that risk and once assessed, consider how to mitigate it. Alternatively, firms may choose to rearticulate or amend existing identified risks, to consider QM fatigue issues – and then reassess and mitigate those risks. 

Effective mitigation will be, at least partly, driven by the nature and circumstances of the firm and its unique characteristics. It may be useful to consider that problematic behaviours arising from QM fatigue, such as corner-cutting, may require different mitigation than similar problematic behaviours arising for different reasons.

While there is no one-size-fits-all solution to QM fatigue, possible mitigating responses could include:

• Load sharing – individuals with operational responsibilities might benefit from assistance, and staff members who have not previously been directly involved in the design, implementation and monitoring of the SOQM might benefit from widening their experience
• Role/responsibility rotation – however, this may not be possible in smaller firms
• Increased time resource – for QM-relevant activities
• Improved communication – between those involved in maintaining the SOQM
• Regular support
• Acknowledgement – of the importance of work by those with SOQM-related roles and responsibilities

Objectives, risks and responses

Some firms may fall into the trap of thinking that since their objectives, risks and responses were fine in 2022, they will be fine now. This is not necessarily the case. 

Some firms may have opted for high-level objectives in year one, perfectly appropriate at that time, but now may be the time to add some granularity or even additional objectives over the mandatory ones set out in ISQM 1. 

Even if it isn’t appropriate to amend or complement quality objectives, there may be circumstances that could indicate that the question should at least be considered. Examples could include, but are not limited to:

• structural changes to a firm (a merger, acquisition or opening of a new office);
• significant personnel changes (retirement, recruitment, role changes or promotions);
• significant changes in client base (such as extending the audit practice into new sectors);
• significant new resources (such as introducing new IT tools, including artificial intelligence); and
• new or changed legislation/regulation (such as ISA 600, the new audit regulations, and ICAEW CPD requirements).

If objectives are amended or complemented, then firms must consider whether existing identified risks, and the assessments of those risks, are still valid. Even without changes to objectives, firms should still regularly consider whether identified risks and their assessments remain appropriate.

New or amended identified risks and risk assessments will lead to, at the very least, a consideration of the ongoing appropriateness of risk responses.

Where the firm has identified issues with objectives, risks or responses, as a result of monitoring the actions arising from the root cause, analysis of any deficiencies found will need to be implemented.

All of this means that the ‘QM thing’ is unlikely to be done and dusted for most firms.

Monitoring and remediation process

As we approach the second anniversary of ISQM implementation, many firms will have recently concluded their second round of ISQM 1-compliant internal monitoring, while others will still be completing it. 

Last year, monitoring will have covered the design, implementation and effectiveness of the SOQM – but maybe only up to a point. Some firms may not have been able to evaluate the effectiveness of the firm’s remediation process by 15 December 2023. This year, firms should be able to fully evaluate the processes, including the design, implementation and effectiveness of action plans. This may be challenging for some firms, but it is an important part of closing the quality management circle.

Are we nearly there yet?

The fundamental philosophy of QM is one of genuine continuous improvement. Managing quality necessarily includes taking account of changes to the nature and circumstances of a firm, or the environment in which it operates, and correcting course when necessary. 

The implementation of ISQM 1 was never intended to be a one-off exercise – managing quality must be proactive and iterative. It provides valuable learning opportunities if this energy can be successfully sustained. 

ICAEW has not stood still either. On 14 November, it is hosting a free, virtual event bringing together members – from sole practitioners to the largest global firms – to discuss how best to maintain ISQM 1 momentum. 

Meanwhile, ICAEW’s Technical Advisory Services has published a technical helpsheet offering guidance to help firms comply with the documentation requirements under ISQM 1 in respect of the evaluation of SOQM.  

Gill Spaul is Quality Management Director, Crowe Global and Chair of ICAEW’s Audit & Assurance Faculty Quality Management working party