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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Professional and ethical developments

Marlow & Co, a mid-sized audit firm, is implementing ISQM 1. The managing partner says the firm's quality objectives will be set by the engagement partners on each audit, with no firm-level involvement. Which statement about ISQM 1 best identifies the flaw in this approach?

ISQM 1 requires the firm itself to design, implement and operate a system of quality management, and its leadership holds ultimate responsibility. Leaving objectives to individual engagement partners ignores this firm-level duty, and the standard is not restricted to listed-entity audits.

  1. AISQM 1 requires the firm to design, implement and operate a system of quality management, with leadership taking ultimate responsibility for itCorrect
  2. BISQM 1 applies only to firms that audit listed entities, so Marlow & Co is not required to act
  3. CISQM 1 makes engagement partners solely responsible for quality, so the approach is correct
  4. DISQM 1 requires the firm's quality objectives to be set by the regulator rather than by the firm

Explanation

ISQM 1 requires a firm-level system of quality management using a risk-based approach, and the firm's leadership must take ultimate responsibility and accountability for it. Engagement partners are responsible for quality on their engagements under ISA 220 (Revised), but that does not replace the firm-level system. The scope is not limited to listed entity audits.

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