The Council of the Institute in its 362nd meeting held on October 28-29, 2022, on the recommendation of the Auditing Standards and Ethics Committee (the Committee), has adopted the Quality Management Standards issued by the International Auditing and Assurance Standards Board (IAASB).
The Quality Management Standards include:
a) International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or
Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
b) International Standard on Quality Management (ISQM) 2, Engagement Quality Reviews; and
c) ISA 220 (Revised), Quality Management for an Audit of Financial Statements.
Effective date of Quality Management Standards
The Council has decided that the Quality Management Standards will be effective as per below dates:
| Firms | Effective date |
| Firms performing the audits of public interest companies | Effective from December 15, 2023 |
| Firms performing the audits of other than public interest companies | Effective from December 15, 2024 |
* The term ‘Firm’ as defined in Quality Management Standards includes a sole practitioner, partnership or corporation or other entity of professional accountants, or public sector equivalent.
Firms are required to have the system of quality management (SOQM) designed and implemented in accordance with ISQM1 by the above-noted effective dates. The evaluation of the SOQM is required to be performed within one year following the above effective dates. The Institute suggests that the firms begin the implementation process now.
Firms are required to perform the engagement quality reviews (EQRs), under the new Quality Management Standards, of (a) audit and review engagements for financial statements periods commencing on or after above-noted effective dates; and (b) other assurance and related services engagements beginning on or after above-noted effective dates.
Early adoption of Quality Management Standards is permitted; however, firm is required to adopt all three Quality Management Standards (i.e. ISQM 1, ISQM 2, and ISA 220 (Revised) at the same time.
ISQC 1 will be superseded by Quality Management Standards
The Quality Management Standards will replace the extant International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements and Other Assurance and Related Services Engagements, and ISA 220.
The Auditing Standards & Ethics Committee’s due process for adoption of Quality Management Standards
The Auditing Standards & Ethics Committee (the Committee) undertook a comprehensive study and review for the adoption of the Quality Management Standards. The Quality Management Standards were shared with the members and other stakeholders, including the Quality Assurance Board, Practicing Members Committee and SMP Committee for their comments and feedback. The Institute as part of member’s outreach and consultation also organized awareness seminars on the Quality Management Standards in Karachi, Lahore and Islamabad which were also virtually attended by members of other cities.
The Committee based on members and stakeholders feedback, decided to recommend to the Council a phased approach for the adoption of Quality Management Standards.
Useful publications and resources
The Quality Management Standards can be accessed and downloaded from http://www.icap.net.pk/archives/6615.
A snapshot of the Quality Management Standards is provided in Appendix A to this Circular.
For the members and other stakeholders facilitation, various publications and resources developed by the IAASB and the Institute have also been uploaded on the Institute’s website. Details of various resources and publications is provided in Appendix B to this Circular.
Circular 06 – Adoption of Quality Management Standards