ISQM 1 and its Differences from ISQC 1
At the end of 2020, the International Auditing and Assurance Standards Board (IAASB) issued two new standards, one of which is the International Standard on Quality Management 1 (ISQM 1). This standard was endorsed as a replacement for the previous standard, International Standard on Quality Control 1 (ISQC 1). So, what are the differences between ISQM and ISQC? In this article, TGS AU Partners will delve deeper into the implementation of ISQM 1 in public accounting firms and the differences between these standards and ISQC 1.
ISQM 1 Will be Adapted in Indonesia?
ISQM 1 (International Standard on Quality Management 1) is an international standard that regulates quality management in audit practices, reviews, assurance, and other services related to financial statements or other financial information. Every public accounting firm (KAP) that conducts audits based on IAASB international standards is required to design and implement a quality management system in accordance with ISQM 1 starting from December 15, 2022.
According to Steven Tanggara, Chairman of DSPAP IAPI, in a mini-class on "Strengthening the Accounting Profession through the Implementation of Quality Management Systems in the Digitalization Era," Indonesia will adopt ISQM 1 as the Standard Manajemen Mutu 1 (SMM 1). This standard will replace Standard Pengendalian Mutu 1 (SPM 1).
Our Service Recommendations
In the mini-class held on July 26, Steven also informed that DSPAP IAPI is currently in the process of translating the standard from English to Indonesian. Learning and analysis related to the standard are also ongoing in preparation for the adoption of the new standard. IAPI targets the completion of SMM 1 by the end of 2024.
In facing the transition from SPM 1 to SMM 1, Kusumaningsih Angkawijaya, Chairman of IAPI, also discussed the preparations that need to be made by public accounting firms. She emphasized the importance of understanding the IAASB standard context by reading supporting materials on the implementation of SMM available on the IAASB site. Additionally, she suggested that accountants, KAP staff, and even regulators attend various webinars discussing ISQM 1 to gain a better understanding of quality management.
ISQM 1 and its Key Changes from ISQC 1
In December 2020, IAASB introduced three new quality management standards, one of which is ISQM 1, replacing ISQC 1. These new standards represent a significant transformation that requires public accounting firms to take a proactive approach to quality management for consistency in work, risk identification, and handling.
ISQM 1 is fundamentally different from its predecessor, ISQC 1. To understand the differences between ISQM and ISQC, here are some points of change found in ISQM 1:
-
It has a more proactive approach focused on achieving quality objectives by identifying and responding to risks.
-
Expanded requirements to modernize standards and factors affecting the firm's environment, including requirements to address technology, networks, and the use of external service providers.
-
Introduces new requirements to address information and communication issues, including communication with external parties.
-
Increased requirements in monitoring and remediation. This is done to promote more proactive monitoring of the quality management system (SOQM) as a whole and to create effective and timely remediation.
News & Articles Recommendations.
-
Increased requirements to address firm governance and leadership.
Conclusion
In conclusion, quality is a crucial aspect of auditing to ensure compliance and accuracy. To help ensure quality, IAASB has introduced ISQM 1 as a standard that regulates quality management in audit practices, reviews, assurance, and other services. As an update from ISQC 1, ISQM 1 has a more proactive approach to facilitate achieving the quality objectives of audits.
In the context of the launch of ISQM 1 in Indonesia, accountants must respond positively to the implementation of this standard to obtain audit reports with the required quality standards and provide confidence to clients and other stakeholders. Collaboration among public accounting firms is also necessary for accountants to understand the implementation of the standard more quickly and accurately.
News & Articles Recommendations.
