This guidance is intended to help firms comply with the documentation requirements under ISQM (UK) 1 in respect of the evaluation of the system of quality management (SOQM) which must take place at least annually. Whilst ISQM (UK) 1 has specific requirements in terms of documentation, there is no prescribed format for the firm’s evaluation or documentation, and a standard “checklist” approach is not suitable. ISQM (UK) 1 is designed to be scalable and to take into account the nature and circumstances of the firm, as well as the engagements performed. Therefore, the following guidance is not a checklist. It is one example of a possible approach and is not prescriptive nor intended to suggest that other approaches would not be appropriate or more suitable for a firm’s needs.

The guidance does not address the periodic performance evaluations of the individuals assigned ultimate responsibility and accountability for the SOQM, or the individuals assigned operational responsibility for the SOQM. The results of any such reviews performed in the year will be taken into account during the evaluation of the SOQM.

The firm will have already established quality objectives, identified and assessed risks to the quality objectives, and designed and implemented responses to address the quality risks covering the following elements:

1. The firm’s risk assessment process
2. Governance and leadership
3. Relevant ethical requirements
4. Acceptance and continuance of client relationships
5. Engagement performance
6. Resources
7. Information and communication
8. Specified responses
9. The monitoring and remediation process

These risk responses will be unique to the firm, designed with the intention of allowing the firm to meet the objectives of the SOQM. For this reason, risk responses, including relevant policies and procedures, have not been prepopulated in the example template set out below.

An example has been provided to demonstrate the use of the template for illustrative purposes only.

More guidance on is available from ICAEW on the above areas:

• Identifying and assessing quality risks under ISQM (UK) 1
• Assisting small audit firms with their quality management journey
• ISQM (UK) 1 – tools for the journey

An annual evaluation of the internal quality control system is required, including, as a minimum, the results of monitoring policies and procedures for carrying out audits, coaching, supervising and reviewing the activities of the firm's personnel and organizing the structure of the audit file.  Monitoring will also include review of completed engagements (cold file reviews). The firm may need to add other areas based on their own firm risk assessment.

This evaluation is just one point in a continuous cycle of monitoring and remediating the SOQM. It should include results of monitoring of the effectiveness of actions arising from previous cycles of monitoring, and subsequent follow-up must be planned to ensure that issues identified during this evaluation period are successfully remediated.

For convenience, the guidance also includes:

• additional requirements of the UK audit regulations, including those relating to auditor eligibility
• other review and communication procedures specifically required to be performed annually by ISQM (UK) 1.

To access example documentation of annual evaluation, for you to use as a template, please download the helpsheet as a Word document:

• Download the full helpsheet

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.