The 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 (ISQM 1) (previously International Standard on Quality Control 1 (ISQC1)) deals with a firm’s responsibilities to design, implement and operate a system of quality management for audits or reviews of financial statements, or other assurance or related services engagements. If a firm has systems of quality management that are designed and implemented in accordance with ISQM 1, the intended users’ degree of confidence in the ESG disclosures is enhanced.  

A system of quality management consists of policies designed to provide the firm with reasonable assurance that:

• the firm and its personnel fulfil their responsibilities in accordance with professional standards and applicable legal and regulatory requirements, and conduct engagements in accordance with such standards and requirements; and
• engagement reports issued by the firm or engagement partners are appropriate in the circumstances.

The new standard:

• is effective from 15 December 2021, and firms are required to have systems of quality management designed and implemented in accordance with ISQM 1 by 15 December 2022;
• strengthens firms’ systems of quality management through a robust, proactive and effective approach to quality management; and
• encourages firms to design a system of quality management that is tailored to the nature and circumstances of the firm and engagements it performs.