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From quality control to quality management: New AICPA quality standards are here—is your firm ready?

February 27, 2024

by Jack Abdo, CPA

Quality management system

If your accounting firm issues reports on financial statements (and you weren’t recently living under a rock or on sabbatical), you likely know the AICPA issued new standards on quality management last year. The standards, which are commonly referred to as Statement of Quality Management Standard (SQMS) No. 1 and SQMS No. 2, cover how you do your work, how you hire people, and require a risk assessment around what you’re doing.

SQMS No. 1 requires firms to design and implement a system of quality management. SQMS No. 2 is specific to requirement for performing engagement quality reviews. Both standards are effective Dec. 15, 2025, and must be implemented by then.

If your firm is in procrastination mode and did not start implementing the standards last year, it’s imperative to get moving on it this year. You do not want to wait until summer 2025 to convert to the new quality management standards.

So, where do you begin? Given the nature of the two standards, it makes sense to first implement SQMS No. 1 and then SQMS No. 2. (Completing SQMS No. 1 does not automatically lead to compliance with SQMS No. 2.)

Implementing any type of change—particularly new standards—can be challenging. To help you get rolling, here’s how our firm implemented SQMS No. 1.

1. Designate a champion.

First things first, you need a leader—someone who will lead and be accountable for the process of implementing the standard. We designated a partner who leads our audit and attest service line to serve as our champion.

2. Form a task force.

Our task force was comprised of 7–8 individuals (partners and managers) who represented various industries and types of financial reporting within our firm and headed up by our champion. Each person read SQMS No. 1 in its entirety before we began.

3. Complete the CPE.

The AICPA has published a one-hour CPE that covers the standard. Our task force chose to watch it as a group to give everyone the opportunity to learn more about it together. After we watched the CPE, we spent a half-hour discussing it. This helped to ensure we were all on the same page from day one.

4. Assign tasks.

To comply with SQMS No. 1, firms must establish quality objectives, assess quality risks, and design and implement responses. In addition, firms must evaluate and perform a risk assessment process of their quality management system each year.

SQMS No. 1 lays out six components (other than risk assessment and monitoring) that should be encompassed in your quality management system. These are as follows:

  • Governance and leadership
  • Relevant ethical requirements
  • Acceptance and continuance of engagements
  • Engagement performance
  • Resources (human, technological, intellectual and service providers)
  • Information and communication (how you inform and communicate with staff)

We divided up these components among our task force members, so each person had an area to champion.

5. Bring it back together.

Once each champion had worked through their respective component, we brought the task force back together and conducted our overall risk assessment. We also set up a way to conduct ongoing monitoring of the entire quality management system.

It’s important to note that you must complete your first risk assessment by the deadline I mentioned earlier—Dec. 15, 2025. This means you must be in a good position going into 2025, which is why it’s wise to start implementing SQMS No. 1 asap.

6. Follow the AICPA guide.

Through it all, we followed the AICPA guide for the standard, which was published in September 2023. We found it to be a great resource when implementing the standard.

Not sure where to start?

These standards apply to any firm that does audit and attest work—from sole proprietorships to major firms. If you’re not sure how to get the implementation process in motion, we can help.

Our advisors can provide guidance and consulting, whether that’s sitting in on your task force or walking you through the implementation of your firm’s quality management system. You can focus on serving your clients while we take care of planning out the details.

If you’d like to learn more about how we could help your accounting firm, contact us today.


Meet the Expert

Jack Abdo, CPA

Overseeing Abdo’s audit practice, Jack helps organizations navigate the path to success.

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