Adapting to New Quality Management Standard
IAASB’s new International Standard on Quality Management provides the accountancy profession with a timely opportunity to show their commitment to quality and integrity.
The International Audit & Assurance Standards Board (IAASB) has recently launched ISQM 1 also known as the new International Standard on Quality Management. The new Quality Management standard is applicable to all firms engaged in audit and assurance services and provides the accountancy profession with a timely opportunity to show their commitment to quality and integrity. The unprecedented global disruption seen over the last 12 months has had an extraordinary impact on the confidence of business and industry, the role of professional reputation is more important than ever to support organizations move forward with confidence.
At Crowe, we are committed to embedding this new standard in our business and across our network of firms. A series of events introduced the new approach to quality management to our leaders across the world who learnt that the new standard introduces a risk-based approach focused on achieving quality objectives. It requires firms to establish quality objectives and then to identify and assess the quality risks that might cause those objectives to not be achieved. Crowe leaders explored ways to adapt their approach to manage the quality risks identified.
Key to the implementation is the reaffirmation that our leadership has overall responsibility for quality at Crowe and that includes creating a culture and environment that proactively upholds quality.
To successfully incorporate quality management across the whole business, it is essential to set the tone at the top. Even though the new standard is not effective until 15 December 2022 it is imperative that firms give enough time for their people to adapt to and feel confident with the new standard. To do this right firms should start their planning for the implementation of ISQM 1 now.
Commenting on implementing this change successfully, Nigel Bostock, Chief Executive of Crowe UK says: "Leadership is about setting the tone from the top. This new standard requires that the Chief Executive, Managing Partner or Board of your firm take ultimate responsibility for your firm’s system of quality management. We then need to also identify those individuals who will take responsibility for the key operational responsibilities for ISQM 1”.
He adds: “These decisions should not be taken lightly, and we should ensure that the individuals we choose to assign to these roles are appropriate and understand their responsibilities. Having assigned these roles, immediate focus should be on ensuring you, your leadership teams. and those assigned to the key operational responsibilities, all understand ISQM 1."
As Crowe members embark on their journey to embrace the new Quality Management standard they are learning how to do this successfully. Here they share ten top tips for leadership teams who are embarking on this new road.
Ensure you understand ISQM1 and what will be required
At this stage you do not need to know all the detail but ensure you understand the key principles.
Start the discussion with your leadership teams
Quality management is something you should be discussing more widely in your firm. For example, in December at Crowe UK’s virtual partner conference, they had a session where the Chief Executive introduced ISQM1 and then invited a panel involving leaders from audit, tax, business solutions, corporate finance and ethics, to discuss what this will mean across the firm.
Distinguish between ‘firmwide quality management’ and, where applicable, ‘audit quality management’
There are general matters that should be applied consistently across your firm as you implement quality management processes and then there are more specific audit related requirements. Ensure you do not overburden all of your business with requirements that are more audit specific – it is about balance and proportionality.
Identify your team to work on this across your firm
Ensure you have a team from different disciplines and functions to lead with you on this project. This will ensure your project plan will gain wider perspective and views from across your business as you implement quality management.
Assess where you are now, identify what you do well, where the informal needs to be made formal and where you perceive the gaps are
You may already use positive quality management processes across your firm, some more formal than others, so start by taking a step back and honestly evaluating where you feel you are starting from on this journey.
Evaluate what needs to be done
Develop an Action Plan
Set realistic timelines.
Prioritise the ‘Must Do’s’ versus the ‘Can Do’s’
Focus on what is most important and most critical first.
Ensure your firm engage in network events and communications, liaise and work with other member firms, and understand any network expectations on quality management that are issued
We are all in this together so let us work together, do not reinvent the wheel. Leverage ideas from others as well as contributing your own.
Start the journey now – doing nothing should not be an option
Managing a firm during a global pandemic is not easy and 15 December 2022 seems a long way away, and it is perhaps easier not to do anything yet. However, put these thoughts to one side and start the journey, there is potentially a lot to do but it is manageable if you start now and set clear timelines between now and December 2022.