TWSQM1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements

Status

Issued by Auditing Standards Committee in Taiwan on 4 October, 2022

Summary

This Standard 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.

A system of quality management operates in a continual and iterative manner and is responsive to changes in the nature and circumstances of the firm and its engagements. It also does not operate in a linear manner. However, for the purposes of this Standard, a system of quality management addresses the following eight components:
(a) The firm’s risk assessment process;
(b) Governance and leadership;
(c) Relevant ethical requirements;
(d) Acceptance and continuance of client relationships and specific engagements;
(e) Engagement performance;
(f) Resources;
(g) Information and communication; and
(h) The monitoring and remediation process.
This Standard requires the firm to apply a risk-based approach in designing, implementing and operating the components of the system of quality management in an interconnected and coordinated manner such that the firm proactively manages the quality of engagements performed by the firm. In applying a risk-based approach, the firm is required to take into account:
(a) The nature and circumstances of the firm; and
(b) The nature and circumstances of the engagements performed by the firm.
The firm shall:
(a) design, implement and operate a system of quality management. In doing so, the firm shall exercise professional judgment, taking into account the nature and circumstances of the firm and its engagements; and
(b) design and implement a risk assessment process to establish quality objectives, identify and assess quality risks and design and implement responses to address the quality risks.
The firm shall establish quality objectives that:
(a) address the firm’s governance and leadership, which establishes the environment that supports the system of quality management;
(b) address the fulfillment of responsibilities in accordance with relevant ethical requirements, including those related to independence;
(c) address the acceptance and continuance of client relationships and specific engagements;
(d) address the performance of quality engagements;
(e) address appropriately obtaining, developing, using, maintaining, allocating and assigning resources in a timely manner to enable the design, implementation and operation of the system of quality management; and
(f) address obtaining, generating or using information regarding the system of quality management, and communicating information within the firm and to external parties on a timely basis to enable the design, implementation and operation of the system of quality management..
The firm shall establish a monitoring and remediation process to provide relevant, reliable and timely information about the design, implementation and operation of the system of quality management, and to take appropriate actions to respond to identified deficiencies such that deficiencies are remediated on a timely basis. .
This Standard requires that, at least annually, the individual(s) assigned ultimate responsibility and accountability for the system of quality management, on behalf of the firm, evaluates the system of quality management.
The firm shall prepare documentation of its system of quality management.

Effective date

Systems of quality management in compliance with this Standard are required to be designed and implemented by December 31, 2023, and the evaluation of the system of quality management required by paragraphs 52–53 of this Standard is required to be performed before December 31, 2024.