Governance & Leadership

Deals with matters such as the:

1. Firm’s culture
2. Leadership responsibility and accountability
3. The firm’s organizational structure
4. Assignment of roles and responsibilities, and
5. Resource planning and allocation.
   

Requirements of the ISQM 1 Standard (and Proposed SQMS 1)

Establish the following quality objectives that address the firm’s governance and leadership:

• Demonstrates a commitment to quality through a culture that exists throughout the firm, which recognizes and reinforces: (Ref: Para. A55–A56) 
• Serving the public interest by consistently performing quality engagements;
• Importance of professional ethics, values and attitudes;
• Responsibility of all personnel for quality relating to the performance of engagements; and
• Importance of quality in the firm’s strategic decisions/actions including financial and operational priorities.
• Leadership is responsible and accountable for quality. (Ref: Para. A57)
• Leadership demonstrates a commitment to quality through their actions and behaviors. (Ref: Para. A58)
• Organizational structure & assignment of roles, responsibilities, and authority is appropriate to enable the design, implementation, & operation of firm system of quality management. (Ref: Para. A32, A33, A35, A59) 
• Resource needs, including financial resources, are planned for and resources are obtained, allocated or assigned in a manner that is consistent with the firm’s commitment to quality. (Ref: Para. A60–A61) 

Acceptance & Continuance

Deals with the firm’s judgments about whether to accept or continue a client relationship or specific engagement.

Requirements of the ISQM 1 Standard (and Proposed SQMS 1)

Establish the following quality objectives that address the acceptance and continuance of client relationships and specific engagements: 

• Judgments by the firm about whether to accept or continue a client relationship or specific engagement are appropriate based on: 
• Information obtained about the nature and circumstances of the engagement and the integrity and ethical values of the client (including management, and, when appropriate, those charged with governance) that is sufficient to support such judgments; and (Ref: Para. A67–A71) 
• The firm’s ability to perform the engagement in accordance with professional standards and applicable legal and regulatory requirements. (Ref: Para. A72) 
• The financial and operational priorities of the firm do not lead to inappropriate judgments about whether to accept or continue a client relationship or specific engagement. (Ref: Para. A73–A74) 
  
  

Resources

• Deals with obtaining, developing, using, maintaining, allocating and assigning resources in a timely manner to enable the design, implementation and operation of the SQM.
• Includes 1) technological, 2) intellectual, 3) human resources, and 4) service providers.
  

Requirements of the ISQM 1 Standard (and Proposed SQMS 1)

Establish the following quality objectives that address appropriately obtaining, developing, using, maintaining, allocating and assigning resources in a timely manner: (Ref: Para. A86–A87, A95–A97)

Human Resources 

• Personnel are hired, developed and retained and have the competence and capabilities to achieve quality objectives (Ref: Para. A88–A90); demonstrate a commitment to quality and are held accountable (Ref: Para. A91–A93); and individuals are obtained from external sources when needed to achieve quality objectives. (Ref: Para. A94) 

Technological Resources

• Appropriate technological resources are obtained or developed, implemented, maintained, and used, to enable the operation of the firm’s system of quality management and the performance of engagements. (Ref: Para. A98–A101, A104)

Intellectual Resources

• Appropriate intellectual resources are obtained or developed, implemented, maintained, and used, to enable the operation of the firm’s system of quality management. (Ref: Para. A102–A104)

Service Providers 

• Human, technological or intellectual resources from service providers are appropriate for use in the firm’s system of quality management and in the performance of engagements. (Ref: Para. A105–A108)
  
  

Monitoring & Remediation

• Provides the firm with information about the design and operation of the SQM; and
• Addresses the remediation of deficiencies on a timely basis.
  

Requirements of the ISQM 1 Standard (and Proposed SQMS 1)

Establish a monitoring and remediation process to: (Ref: Para. A138) 

• Provide relevant, reliable and timely information about the system of quality management. 
• Take appropriate actions to respond to identified deficiencies and remediate them on a timely basis. 
• Design and perform monitoring activities to provide a basis for the identification of deficiencies.
• Include the inspection of completed engagements in its monitoring activities. (Ref: Para. A141, A151–A154)
• Assess the competency and objectivity of individuals performing monitoring. (Ref: Para. A155–A156) 
• Evaluate findings to determine whether deficiencies exist. (Ref: Para. A157–A162)
• Evaluate the severity and pervasiveness of identified deficiencies. (Ref: Para. A161, A163–A164)
• Design and implement remedial actions to address identified deficiencies. (Ref: Para. A170–A172)
• Communicate on a timely basis monitoring and remediation process. (Ref: Para. A174)