During 2021, the AICPA’s Auditing Standards Board invited comments on its exposure draft, Proposed Quality Management Standards.
According to an AICPA press release (February 2021), “the standards offer a new proactive, risk-based approach to effective quality management systems within CPA firms, which will improve the scalability of the standards and promote a system tailored to the firm and its engagements.”
The proposed standards included:
- Proposed Statement on Quality Management Standards (SQMS) A Firm’s System of Quality Management
- Proposed SQMS Engagement Quality Reviews
- Proposed Statement on Auditing Standards (SAS) Quality Management for an Engagement Conducted in Accordance with Generally Accepted Auditing Standards.
A SCACPA task force reviewed the proposed standards and submitted comments to the AICPA in August. In total, the AICPA received 171 comment letters. The ASB was responsive to the comments. Based on the received feedback, changes to the standard include:
- “Permit self-inspection. The ASB believes that a prescriptive preclusion is inconsistent with a risk-based approach and the cost of unintentional negative consequences of the prohibition seems to exceed the benefits.
- Do not require a cooling-off period for EQRs. The ASB believes it would be inconsistent in the US to require EQR rotation but not engagement partner rotation.
- Retain the extant requirement that the EQR has to be completed before the report is released, and not before the report is dated. The ASB believes that the flexibility of using the report release date provides greater benefit than the logistical cost of restricting the time available for completing the EQR.
The ASB also directed the inclusion of principles-based guidance about the quality risks associated with self-inspection and lack of EQR rotation and how the auditor might develop responses to them.”
These changes are in congruence with the comments submitted by the SCACPA task force. SCACPA thanks the members of this task force for their time, dedication, and attention to this important issue. The members include Angela Allard, CPA, Joe Beck, CPA, Zoe Davis, CPA, and Lesley Kelly, CPA.
The effective date of the proposed standards is pending. Melisa Galasso mentions this in her 2021 review video, found here.
