ICAI issues two new Standard on Quality Management SQM 1 and SQM2
The Institute of Chartered Accountants of India (ICAI) has issued two new Standard on Quality Management (SQM) as under:
| S. No. | Standards | Effective Date |
| 1. | SQM 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements |
Audits and reviews of financial statements for periods beginning on or after April 1, 2025; and Other assurance and related services engagements beginning on or after April 1, 2025 |
| 2. | SQM 2, Engagement Quality Reviews | Recommendatory- Systems of quality management in compliance with this SQM are required to be designed and implemented by April 1, 2025, and the evaluation of the system of quality management required by paragraphs 53–54 of the SQM is required to be performed within one year following April 1, 2025. Mandatory – Systems of quality management in compliance with this SQM are required to be designed and implemented by April 1, 2026, and the evaluation of the system of quality management required by paragraphs 53–54 of the SQM is required to be performed within one year following April 1, 2026 |
The Standard on Quality Management (SQM) 1 deals with a firm’s responsibilities to design, implement and operate a system of quality management for audits or reviews of financial statements, or other assurance or related services engagements. Engagement quality reviews form part of the firm’s system of quality management. The SQM 1 deals with the firm’s responsibility to establish policies or procedures addressing engagements that are required to be subject to engagement quality reviews. The Standard on Quality Management (SQM) 2 deals with the appointment and eligibility of the engagement quality reviewer; and the engagement quality reviewer’s responsibilities relating to the performance and documentation of an engagement quality review. SQM 2 applies to all engagements for which an engagement quality review is required to be performed in accordance with SQM 1. The SQM 2 is premised on the basis that the firm is subject to SQM 1. An engagement quality review performed in accordance with this SQM is a specified response that is designed and implemented by the firm in accordance with SQM 1. The performance of an engagement quality review is undertaken at the engagement level by the engagement quality reviewer on behalf of the firm.
The extant corresponding standard i.e. SQC 1 will continue to be applicable till these standards become applicable.Â
The SQM 1 and SQM 2 contain conforming amendments to various other standards which would be applicable from the date of applicability of these standards.
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- ICAI issues FAQs on key accounting implications arising from New Labour Codes
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