ISQM for the small practice

For small audit firms, this transition can seem particularly daunting. But in fact, it provides a positive opportunity to rethink the firm’s audit practices, structure and policies so that audit quality is put first. What’s more, it needn’t take months to achieve compliance (though it may take longer than you might think). The key is to start now.

So where does a small firm start?

ISQM 1 is built around two processes – a risk assessment process and a monitoring and remediation process, which focus on six key areas:

1. Governance and leadership;
2. Ethical requirements;
3. Acceptance and continuance of relationships and engagements;
4. Engagement performance;
5. Managing resources; and
6. Information and communication.

Within each of these areas, your firm will need to set quality objectives – however, ISQM 1 already contains several and smaller firms may find that they don’t need to set any further objectives beyond these.

Risk assessment process

You’ll then need to identify and evaluate quality risks relating to each objective. This process should be scalable and practical – for example, in a two-partner firm, is there a risk that one (or both!) partners consider audit to be a ‘second-class service’ and choose not to invest in their team’s training and resources?

Once you’ve considered and prioritised the likely quality risks, you’ll need to counter these with responses. Several of these are already specified in ISQM 1, leaving you to mop up any remaining risks with tailored responses. Then you’ll need to action these, writing them into procedures and ensuring they’re implemented.

Monitoring and remediation process

Once the system is up and running, firms will need to monitor the system and address any deficiencies that arise. The whole system must be reviewed at least annually to ensure that it’s working effectively.

For more

All of this is achievable – but time is running out to get going. Our session at Practice Live 2022 will focus on practical tips to ease the process and ensure you hit the December deadline.

Can’t attend Practice Live in person? This session will be available to view on demand afterwards.