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Quality Management for Firms and Engagements

Technical Resource

This webpage contains pronouncements, guides and articles that are relevant to the new and revised Quality Management Standards.

Effective Date

The standards are effective from 15 December 2022. They replace the extant HKSQC 1 and HKSA 220.

Affected standards

The new and revised Quality Management Standards consist of:

HKSQM 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements

HKSQM 1 deals with the firm’s responsibility for quality through having a system of quality management. It replaces HKSQC 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements and Other Assurance and Related Services Engagements.
Under HKSQM 1, firms are required to design a system of quality management to manage the quality of engagements performed by the firm. This shift in focus from quality control to quality management is achieved by incorporating a risk-based approach, i.e., managing risks to quality.
HKSQM 1 applies to all firms performing audits or reviews of financial statements, or other assurance or related services engagements, including compilations or agreed-upon procedures engagements.

HKSQM 2 Engagement Quality Review

HKSQM 2 deals with the eligibility of the engagement quality reviewer (EQR), and the performance and documentation of the EQR. Although HKSQM 2 is a new standard, many of its elements were enhanced and relocated from extant HKSQC 1 and HKSA 220.

HKSA 220 (Revised) Quality Management for an Audit of Financial Statements

HKSA 220 (Revised) applies to audits of financial statements and addresses how quality is managed at the audit engagement level by the engagement partner. It makes clear that the engagement partner is responsible for managing and achieving quality at the engagement level, for determining that there are sufficient and appropriate resources assigned or made available on a timely basis and for determining the nature, timing and extent of direction, supervision and review. It also contains a “stand-back” provision that requires the engagement partner to determine they have done enough to take overall responsibility for managing and achieving quality on the audit and whether their involvement has been sufficient and appropriate.

Click below for more information:

HKSQM 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements and Conforming Amendments to HKSAs and Related Material Arising from the Quality Management Projects
HKSQM 2, Engagement Quality Review
HKSA 220 (Revised), Quality Management for an Audit of Financial Statements
IAASB resource centre on Quality Management Standards
- Basis for Conclusions & Factsheets – ISQM 1, ISQM 2, ISA 220 (Revised)
- First Time Implementation Guides – ISQM 1, ISQM 2, ISA 220 (Revised)
- Fact Sheet: Highlighting certain aspects of interaction between ISA 220 (Revised) and ISA 600 (December 2022)
- IFAC-IAASB Quality Management Resources (October 2022)
- IAASB quality management webinar series (slides and recordings available) (July 2021)
- Video: Perspectives on initial implementation efforts (May 2021)
- IFAC, IAASB, and ICAC Discussion Forum on Quality Management Standards (March 2021)
- Overview video in English (November 2020) and Mandarin (February 2021)
- One-minute video introduction: IAASB Quality Management Standard (December 2020)
IFAC
- Quality Management web page
- Quality Management Toolkit for Small- and Medium-Sized Firms and Illustrative Risk Matrix (November 2023)
- Small Firm Implementation: Installment One (October 2022) and Installment Two (July 2023)
- IFAC-IAASB Quality Management Resources (October 2022)
- IFAC panel discussions on getting ready for the new risk-based approach and early lessons learned (September 2022)
- Three-part article series: Preparing for the New Quality Management Standards
  - ISQM 1 System Evaluation and Monitoring (January 2022)
  - ISQM 1 Risk Responses (December 2021)
  - ISQM 1 Quality Objectives and Quality Risks (November 2021)
- Getting Started on the New IAASB Quality Management Standards: An Overview (March 2021)

Focus:

Additional references issued by Standard Setters and Regulators

901BTRIBe The Institute Standard Setting Department

A Plus Article:
E-learning: New Quality Management Standards Series

901BTRIBe CPA Canada

Quality management guidance resources

901BTRIBe ICAEW

Resources to help audit firms prepare for new quality management standards
Article: ISQM 1 statements in assurance reports
Webinar recording: Quality Management in audit firms
Webinar recording: What’s new in quality management

901BTRIBe European Federation of Accountants and Auditors for SMEs (EFAA)

Implementation of new quality management standards by SMPs (February 2023)

Last updated: November 2023

Frequently used resources

SMP and SME Resource Centre

HKFRS for Private Entities Information Centre

New Companies Ordinance Resource Centre

IFAC gateway

Technical enquiries

	Click here to submit questions on standards issued by the Institute.