Auditing and Assurance Standards Board Updates Quality Management Standards
In January 2021, the Auditing and Assurance Standards Board (AASB) unanimously approved a series of quality management standards that are relevant to all firms and sole practitioners who perform compilation engagements. Firms that were not governed by the previous Canadian Standard on Quality Control (CSQC) may be governed by Canadian Standard on Quality Management (CSQM) and need to implement a quality management standard for the first time. In this update, a new standard was created, and some existing standards were replaced or amended, including:
- The Canadian Standard on Quality Control (CSQC) 1, has been replaced by Canadian Standard on Quality Management (CSQM) 1.
- CSQM 2 is a new standard, which addresses the appointment and eligibility of engagement quality reviewers and their responsibilities. The requirements relating to engagement quality control reviews was previously contained in CSQC 1.
- CAS 220, Quality Control for an Audit of Financial Statements, has been amended
These changes were approved in January 2021, and the full details can be found in the CPA Handbook – Assurance in May 2021. CSQM 1 & 2 come into effect for audits, reviews, other assurance engagements, and CAS 220 in December 2022 and for compilation engagements and other related services engagements in December 2023.
While the previous standard (CSQC 1) applied only to those firms that performed audits, reviews and other assurance engagements, the new CSQM has a broader scope and applies to firms or sole practitioners that may only perform compilation engagements, agreed-upon procedures engagements and engagements to report on supplementary matters arising from an audit or review engagement.
CSQM 1 is designed to enable firms to design, implement and operate a system of quality management for assurance or related services engagements. This standard shifts from the quality control focus from CSQC to a new, more proactive risk-based approach titled quality management. While there are several components, responsibilities and processes laid out in these standards, they are designed to be scalable based on risk so that smaller firms and firms new to quality management can effectively implement these standards.
CSQM 2 is a separate standard which focuses on more robust performance, documentation requirements, and scalability in relation to engagement quality review (EQR). This standard outlines the appointment and eligibility of an engagement quality reviewer for the policies and procedures outlined in CSQM 1 which determine when an EQR is required to be performed.
The CAS 220 amendments put a focus on the engagement partner and their responsibilities to manage and achieve quality standards. CAS 220 clarifies the engagement partner’s role and responsibilities, clarifying what the engagement partner is responsible for, versus what roles they can take responsibility for, (i.e be assigned to competent members of the engagement team), and introduces a stand-back requirement where they must determine whether they have been appropriately and sufficiently involved throughout the audit so that they are able to make appropriate judgements and conclusions for the engagement.
How AJAG Can Help
These new standards put an emphasis on scalability to allow for firms of all sizes to implement them effectively, but they can still be a challenge. For firms new to quality management standards, it can be a difficult and time-intensive process to develop a system. AJAG has two courses on this topic to ensure you have all the correct information and knowledge for your practice.
Quality Management - New Responsibilities for Firms is a 3-hour course that introduces participants to the requirements of the new Quality Management Handbook sections, and will enable those who complete the course to develop their own customized QAM policies.
Quality Management – Getting Ready to Apply the New Standards is an hour-long course designed to help firms of any size understand the details of these new standards and make the necessary changes.
AJAG has delivered timely PD content relevant to Canadian CPAs in practice and in industry for almost 20 years.
To help you stay up to date with your annual PD requirements, check out our full course listing HERE.