Will ASQM 1 force me out of the audit business if I can’t get my act into gear?
Comments within this CPA article seem to suggest that practices that are not focused on providing audit services as a core business offering, seriously consider whether they continue to offer audit services at all. 
Is it that serious? Let’s investigate further.
ASQM 1 in brief
Effective from mid December 2022, ASQM 1 requires a mindset shift from procedures focused on ‘quality control’ to a comprehensive system of ‘quality managment’.
To achieve ASQM 1 compliance, any accounting services firm needs to design, implement, and operate a system of quality management for audits or reviews of financial reports and other financial information, or other assurance related services and engagements performed by the firm.
The objective of this standard change is to emphasise that a static quality control system (or ‘what did we do last year?’ mindset) is no longer sufficient to be applied to auditing businesses in a dynamic and changing world.
The upgraded standard is designed to stress the importance of governance and leadership over the systems of quality management that underpin the performance of high-quality engagements consistently. As an audit practice you need to demonstrate governance and leadership as part of compliance with this standard.
Can I use a spreadsheet for proving compliance with ASQM 1?
Spreadsheets by their nature can handle numbers and formulae exceptionally well. Spreadsheets don’t generally provide a way of interconnecting external files or checklists. Neither are spreadsheets designed to record who and when they accessed a file or document and the changes that were made.
The ASQM 1 standard specifically states the requirement to demonstrate that audit engagements are coordinated and interconnected with both quality control processes relevant to the specific business being audited, adequate assessment of risk for that business and the oversight of management from a quality perspective.
So unfortunately, a spreadsheet or a series of spreadsheets is not likely to provide the level of documentation and demonstration of quality competency and system interconnectedness required by ASQM1.
Proper implementation of this new standard (based on the international ISQM 1) should take considerable time and effort, monitor and report compliance requirements, as the standard is much more prescriptive than previous quality standards.
As stated by the Auditing and Assurance Standards Board (AUASB):
“ASQM 1 requires that firms have a system of quality management addressing eight core components:
- The firm’s risk assessment process
- Governance and leadership
- Relevant ethical requirements
- Acceptance and continuance of client relationships and specific engagements
- Engagement performance
- Information and communication
- Monitoring and remediation process
This ASQM requires the firm to apply a risk-based approach in designing, implementing and operating the components of the system of quality management in an interconnected and coordinated manner such that the firm proactively manages the quality of engagements performed by the firm.”
How do I implement an ASQM 1 compliant quality management system in time?
The key to compliance is to address the 8 core components outlined in ASQM 1. Due to the limited time left to address this standard for an audit services practice, you should consider tools and technologies readily available which demonstrate an integrated approach to quality processes, risk assessment and audit engagement management.
The key to demonstrating compliance to the ASQM 1 standard is the ability to have adequate records of risk assessments, policies and procedures that have been completed and signed off by management, as well as effective oversight and reviews by skilled personnel.
Looking for a solution to specifically address the 8 core components of ASQM1? You might like to check out our new SQM product.
 “If you’re just doing audits in a small manner, then I would strongly recommend you either cease doing it or decide this is a part of the practice you want to continue and put the resources into making sure you’re compliant.” Leanne Oliver CPA, MD Audit Partners Australia (https://www.cpaaustralia.com.au/public-practice/inpractice/auditing-standard-asqm-1-more-than-checklist)