Accounting & Auditing Conference - Virtual-6 - Dee

6 - Dee - Spotlight-on-QM

Pdf Summary

The presentation explains what firms must do after implementing their system of quality management (SQM) by December 15, 2025: demonstrate that it operates effectively, not merely that it exists.<br /><br />Monitoring is a risk-informed feedback process that combines ongoing activities—such as supervision, coaching, consultations, and independence confirmations—with targeted procedures, including engagement inspections, pre-issuance reviews, and testing of firm-level responses. Firms should consider engagement performance, methodology use, quality responses, and recurring trends.<br /><br />Firms accumulate findings from monitoring, external inspections, and other sources, then use professional judgment to determine whether they indicate deficiencies. This assessment considers severity and pervasiveness. A deficiency may involve missing quality objectives, inadequately assessed risks, ineffective responses, or other failures in the SQM’s design or operation. Repeated patterns, rather than just isolated errors, may reveal system-level problems.<br /><br />Remediation should address the underlying cause. Root cause analysis examines factors such as people, technology, processes, and culture; it is not about assigning blame or defaulting to training. Actions should be linked to the cause, assigned responsibility and timelines, and evaluated for implementation and effectiveness. If problems persist, firms should revisit their analysis and adjust or expand their response.<br /><br />Documentation should record the deficiency, analysis and identified causes, remedial actions, implementation details, effectiveness assessment, results, and any further steps. Root cause analysis should scale to firm size, but not be omitted.<br /><br />Leadership must evaluate the SQM at least annually. The first evaluation is due December 15, 2026, regardless of peer review timing. The evaluation must consider monitoring and remediation results, conclude whether the system provides reasonable assurance, and document the basis for that conclusion. Peer reviewers will assess the system itself, evidence of monitoring, the connection between risks and responses, and leadership’s involvement.

Keywords

system of quality management

SQM

monitoring

risk-informed feedback

deficiency assessment

root cause analysis

remediation

documentation

annual evaluation

leadership oversight