AICPA unveils new QM resources to help firms meet Dec. 15 deadline

Editor’s note:

The author is senior manager–Audit Quality at the Association of International Certified Professional Accountants

The clock is ticking. Accounting firms that perform engagements under the Statements on Auditing Standards (SASs), Statements on Standards for Attestation Engagements (SSAEs) or Statements on Standards for Accounting and Review Services (SSARSs) must establish systems of quality management (QM) by the Dec. 15, 2025, effective date of the new QM standards governing accounting and auditing (A&A) practices.

To help firms meet the deadline, the AICPA updated its 2023 QM practice aid, developed a second practice aid focusing on monitoring the firm’s system of QM, released several new tools, and scheduled a series of online learning opportunities (see the list of webcasts at the end of this article). The AICPA released the first QM-related standards in May 2022, and the AICPA has provided extensive resources to make the process streamlined and efficient (see the November 2024 JofA article, “Resources to Implement the QM Standard”).

The updated practice aid, Establishing and Maintaining a System of Quality Management for a CPA Firm’s Accounting and Auditing Practice, now includes additional information to help implement the requirements of Statements on Quality Management Standards (SQMS) No. 1. The aid features a deep discussion of additional areas of the standard and walks a firm through the QM process, from the early stages of design through the evaluation of the completed system.

Now available as a comprehensive aid, the resource can be used by small- and medium-size firms, as well as by sole practitioners. Where implementation may differ based on a firm’s size, the resource discusses the considerations for sole practitioners, highlighting key areas where implementation may diverge.

SQMS NO. 1 OVERVIEW

The AICPA Auditing Standards Board (ASB) issued SQMS No.1, A Firm’s System of Quality Management, in June 2022. This standard introduces a risk-based approach that provides a scalable methodology to quality for all firms, from sole practitioners to large multinational firms.

The adoption of this risk-based approach allows a firm to customize its QM system to align with the specific nature of its operations and the circumstances of the engagements it performs.

The objective of the standard is quality work which is accomplished in two ways. First, a proper system provides the firm with reasonable assurance that the firm and its personnel fulfill their responsibilities and conduct engagements in accordance with professional standards and applicable legal and regulatory requirements. Secondly, the QM system provides firms with reasonable assurance that engagement reports issued by the firm are appropriate in the circumstances.

WHAT’S NEW IN THE REVISED PRACTICE AID

Among other revisions, the practice aid includes significant new content addressing these areas:

The objective and general requirements and responsibilities

The revised practice aid begins with a newly expanded discussion of the objectives and general requirements of SQMS No.1 and includes a look at the assignment of responsibilities for the system. As you may recall, SQMS No.1 requires that the firm’s managing partner be assigned ultimate responsibility and accountability for the QM system. The discussion now also identifies scenarios that may cause confusion in assigning responsibilities, such as when the firm’s managing partner is a tax partner or otherwise does not perform assurance work. Further, the aid discusses a sole practitioner’s considerations when assigning the different responsibilities called for in the standard.

A deeper discussion of a QM system’s 8 components

Leveraging the firm’s current system of quality control is a key benefit in increasing implementation efficiency. This update includes an overview of how leveraging the current quality activities the firm performs can lessen the changes needed going forward. For each of the system’s components, the resource discusses where SQMS No. 1 has introduced new and enhanced considerations and requirements and highlights where areas remain similar. The discussion of each component covers a review of the required quality objective, which includes:
 

• The firm’s risk assessment process (NEW);
  
  
• Governance and leadership (ENHANCED);
  
  
• Relevant ethical requirements (ENHANCED);
  
  
• Acceptance and continuance of client relationships and specific engagements (ENHANCED);
  
  
• Engagement performance (ENHANCED);
  
  
• Resources (ENHANCED);
   
• Information and communication (NEW); and
  
  
• The monitoring and remediation process.

For each component, the practice aid also highlights implementation differences, where applicable, for small and medium-size firms and sole practitioners, providing additional considerations for very small practitioners.

The practice aid expands on its previous explanation of how to apply a risk-based approach. It includes two libraries of example quality risks and potential responses, one for small and medium-size firms and one for sole practitioners, to guide firms in addressing the required quality objectives. A fillable spreadsheet template is also included to assist with documenting the firm’s risk assessment process, and it now includes additional guidance for documenting that process. Remember, your current system of quality control provides a great foundation for your new system, so do not overlook the policies and procedures already in place.

The evaluation of the system of quality management

Once a firm has designed and implemented its QM system, it is required to evaluate that system within one year of implementation or by Dec. 15, 2026, and on an ongoing annual basis thereafter. The revised practice aid details the requirements for this evaluation, including who is responsible, the components of the process, and what the conclusions will include. When a sole practitioner performs this evaluation, it will be an evaluation of their own work, and the document discusses what considerations might be necessary.

Documentation requirements

As with the accounting and assurance work the firm provides, proper documentation is key. The documentation of the firm’s QM system provides evidence that the firm complies with SQMS No. 1, as well as law, regulation, or relevant ethical requirements. Further, documentation may also be useful for training personnel and engagement teams, ensuring organizational knowledge is retained, and providing a history of the basis for decisions the firm made about its QM system. The revised practice aid includes a deep dive into what is required to be documented and, just as importantly, what form that documentation may take. SQMS No. 1 discusses what should be documented, and the practice aid discusses how a firm may apply the requirements to create an effective account of the system. The discussion includes considerations of the documentation’s extent and detail and how firms of varying sizes may approach the requirements differently.

In addition to these highlighted areas of expanded focus, the revised practice aid also includes a detailed example showing the application of the risk assessment process through the use of a redesigned documentation template. Incorporating feedback from users, the template can help practitioners address each of the components. It includes both the required quality objectives and the specified responses in SQMS No. 1.

The practice aid, the firm-size specific libraries of potential risks and responses, and the risk assessment process documentation template are included in AICPA membership and are available to download. The practice aid package is also available in the AICPA’s Online Professional Library and, for a nominal fee, in ebook and print-on-demand formats.

The AICPA redesigned its QM Hub to gather its most important resources in one central location for practitioners to easily access. You can find not only the revised practice aid and accompanying tools, but also an overview of the standards, FAQs, informational articles, opportunities to learn and interact with other practitioners, and technology tools. The hub’s resources are designed to help firms no matter where they are on their journey.

Applying SQMS No. 1 may seem daunting, but by starting now or steadily moving forward from where you are in your journey, and by taking advantage of these updated resources, your firm can cross the finish line with a system of QM that not only meets the requirements of the standard but also drives continuously improved performance (see the Aug. 12 JofA article, “8 Steps to Build Your Firm’s Quality Management System on Time”).

MEMBER RESOURCES

The AICPA also released a second practice aid, The Monitoring and Remediation Process for a Firm’s System of Quality Management, to provide additional guidance and to supplement the information presented in the recently revised general SQMS No. 1 practice aid. This new resource outlines the requirements and provides application guidance for the design and implementation of a firm’s process for monitoring and remediation and tips for effective ongoing improvement. The practice aid is included in AICPA membership and available to download.

Other valuable resources and information on additional learning opportunities are detailed on the AICPA website, A Journey to Quality Management.

QM learning online — live!

The AICPA is offering several online learning opportunities about QM over the next few months. Two QM Conversations will take place along with one Ask About QM live webcast. The Ask About QM series is included with AICPA membership. 

• Tuesday, Sept. 9, 3–5 p.m. ET: QM Conversations: “Monitoring and Remediation”
  
  
• Tuesday, Sept. 30, 1–2 p.m. ET Ask About QM: “Policies ready? Leadership responsibilities, evaluation, and conclusion”
  
  
• Tuesday, Nov. 4, 3–5 p.m. ET: QM Conversations: “Peer Review”
  
  

QMCore

AICPA subsidiary, CPA.com, has partnered with FinReg to develop QMCore, a comprehensive quality management solution that provides an intuitive and dynamic platform enabling firms to collectively manage their system of quality management. Learn more on the QMCore webpage.

— Dave Arman, CPA, MBA, is senior manager–Audit Quality at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.