ThinkTWENTY20

In a May 16, 2022, blog on the CPA Canada webpage, Jacqui Kuypers writes that new and revised quality management standards are coming into effect soon. Are you ready?

The Auditing and Assurance Standards Board (AASB) approved the folllowing new and revised quality management standards in January 2021:

• Canadian Standard on Quality Management (CSQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements.
• CSQM 2, Engagement Quality Reviews.
• Canadian Auditing Standard (CAS) 220, Quality Management for an Audit of Financial Statements.
• Conforming amendments to other CAS.

The standards were issued in May 2021. CSQM 1 requires firms to design, implement and operate a system of quality management. CSQM 1 takes a risk-based approach to quality management, which is a significant change from the previous standard. In addition, the AASB expanded the scope of the standard: the previous standard, Canadian Standard on Quality Control (CSQC) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance Engagements, did not apply to related services engagements. CSQM 1 applies to all engagements for which there are standards in the CPA Canada Handbook – Assurance.

Kuypers says that the AASB recognized that designing and implementing a system of quality management for the first time will be a significant undertaking. As a result, the AASB deferred the effective date of CSQM 1 as it applies to related services engagements by one year to December 15, 2023. “Firms that perform other services, including audits, reviews and other assurance engagements, will need to have a system of quality management in place by December 15, 2022.”

To complete the quality management project, including ensuring that quality management at the engagement-level is addressed in all standards, the AASB approved conforming amendments to Other Canadian Standards (OCS) in March 2022. The conforming amendments were published in the Handbook in May 2022.

The conforming amendments include revisions to all standards in the Handbook, other than CSQMs and CAS 220, to establish that CSQM 1 and CSQM 2 apply and to set out the engagement partner’s responsibilities for quality management at the engagement level. The effective dates of the conforming amendments vary depending on the nature of the engagement, as explained below.

When are the standards effective?

CSQM 1 requires firms to have their system of quality management in place for audits or reviews of financial statements, or other assurance engagements designed and implemented, by December 15, 2022. Recognizing the additional effort that may be required by firms designing and implementing a system of quality management for the first time, the AASB deferred the effective date for related services engagements by one year to December 15, 2023.

CSQM 2 is effective for audits and reviews of financial statements for periods beginning on or after December 15, 2022, for other assurance engagements beginning on or after December 15, 2022, and for related services engagements beginning on or after December 15, 2023.

CAS 220 is effective for audits of financial statements for periods beginning on or after December 15, 2022.

The effective dates of the engagement-level quality management conforming amendment requirements vary depending on the nature of the engagement, as follows:

• Review and other assurance engagement standards: The conforming amendments will generally be effective for engagements or periods beginning on or after December 15, 2022.
• Related services engagements that are performed in conjunction with, or following, an audit, review or other assurance engagement: The conforming amendments will be effective for engagements or periods beginning on or after December 15, 2022.
• Other related services engagements, including compilation engagements and agreed-upon procedures engagements: Practitioners have an extra year to align with the effective date of CSQM 1. For these engagements, the conforming amendments will be effective for engagements or periods beginning on or after December 15, 2023.

For advice on how to get ready for implementation of the standards, please go to Preparing for the new quality management standards (cpacanada.ca).