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Canadian Standards on Quality Management

Quality Management

Summary

Auditors must effectively manage audit quality, both at the firm and the engagement level, with high-quality audits supporting financial stability.

Staff Contact(s)

Jacqui Kuypers, CPA, CA Principal, Auditing and Assurance Standards Board

Project Status

  • Information gathering

    Completed prior to 2016

  • Approving project

    The IAASB approved the project in December 2016

  • Engaging Communities

    Case study workshop completed by small and medium-sized practitioners and sole practitioners August 2020

    Consultations on Conforming Amendments Exposure Draft completed September 2021

  • Deliberating feedback

    Feedback considered and AASB response letters developed on the IAASB Exposure Drafts

    AASB deliberating feedback received on Conforming Amendments Exposure Draft

  • Final pronouncement

    AASB approved final Canadian Standard on Quality Management (CSQM 1), Quality Management for Firms that Perform Audit or Review Engagements, or Other Assurance or Related Services Engagements, CSQM 2, Engagement Quality Reviews, and CAS 220, Quality Management for an Audit of Financial Statements in January 2021

    AASB approved final revisions to Other Canadian Standards in March 2022

    Final Handbook material now available in the CPA Canada Handbook – Assurance

News


August 2, 2022

International Activity, Resource, Other

IFAC Quality Management Panel Discussion

Learn more about the IAASB’s new and revised quality management standards with two on-demand video panel discussions. The International Federation of Accountants created the video panel discussion to support implementation by small and medium-sized practices. The discussions aim to help practitioners design their systems of quality management as Canada adopts the International standards.

August 2, 2022

International Activity, Resource, Guidance

IAASB Quality Management Implementation Resources

The IAASB has issued several resources to assist practitioners in the first-time implementation of new and revised quality management standards. These include guides for ISQM 1, ISQM 2 and ISA 220 (Revised), and a definition of an engagement team fact sheet. Refer to the IAASB’s focus area web page for these and other resources.

July 5, 2021

Document for Comment

AASB Exposure Draft – Quality Management – Conforming Amendments to Other Canadian Standards

The AASB issued an Exposure Draft proposing conforming amendments to Other Canadian Standards to avoid inconsistencies with the new and revised quality management standards. Submit your comments by September 30, 2021. 

June 29, 2021

International Activity

IAASB First-Time Implementation Guides for ISQM 1 and ISQM 2

The IAASB released first-time implementation guides for ISQM 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements and ISQM 2, Engagement Quality Reviews. These guides are intended to help stakeholders understand and properly implement the requirements in the standards.

June 8, 2021

International Activity

IAASB Quality Management Webinar Series

The IAASB is holding a series of webinars on June 24, July 29, August 5, and August 18. The webinars will take a deep dive into aspects of the IAASB’s new standard on quality management. We encourage stakeholders to register for a webinar or watch the webinars on the IAASB’s YouTube channel following the session.

June 2, 2021

International Activity

New IAASB Video on Quality Management Considerations for Firms

The IAASB released a new video for firms preparing to implement its new quality management standards. Watch this video for information on what may be retained from current quality control systems, the time and resources needed, and various ways to approach implementation.

March 9, 2021

International Activity

IAASB Exposure Draft – Conforming and Consequential Amendments to the IAASB’s Other Standards as a Result of the New and Revised Quality Management Standards

The IAASB issued an Exposure Draft proposing conforming amendments to International standards to avoid inconsistencies with the new and revised quality management standards. Canadian stakeholders are encouraged to respond to the IAASB with a copy to the AASB by May 24, 2021.

March 8, 2021

International Activity

IESBA Exposure Draft – Proposed Revisions to the Definitions of Listed Entity and Public Interest Entity in the Code

The International Ethics Standards Board for Accountants (IESBA) issued an Exposure Draft proposing revisions to the definitions of “listed entity” and “public interest entity” in the Code. These revisions may have implications for International Standards on Auditing. Canadian stakeholders are encouraged to respond to the IESBA with a copy to the AASB by May 3, 2021.

November 27, 2020

International Activity

Video Introduction to the New IAASB Quality Management Standards

The IAASB approved its quality management suite of standards, including ISQM 1, ISQM 2, and ISA 220, in September 2020. The AASB has proposed to adopt these standards in Canada. Watch this video for an introduction to the new IAASB standards.

April 1, 2019

News

Webinar – Quality Management at the Firm and Engagement Level, Including Engagement Quality Reviews

The AASB is issuing an exposure draft on the revised quality management standards at the firm and engagement level, including engagement quality reviews. Register now for the webinar to learn about the proposals and how they will affect your current practice.

March 12, 2019

News

Quality Management at the Firm and Engagement Level, Including Engagement Quality Reviews

The IAASB issued three Exposure Drafts addressing quality management at the firm and engagement level, including engagement quality reviews, as well as an overall explanatory memorandum, FAQs and draft examples for proposed ISQM 1. Stakeholders are invited to comment by July 1, 2019. Visit the news page for full details.

Meeting & event summaries


June 27, 2022

AASB Decision Summary – June 6-7 2022

The AASB discussed a letter received from one of its stakeholders regarding 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. The standard is effective for audits and reviews of financial statements and other assurance engagements as of December 15, 2022.

The stakeholder asked the AASB to consider deferring the effective date, citing several reasons.

The AASB acknowledged and understood the implementation challenges its stakeholder raised. After a thorough discussion, however, the Board concluded that deferring the effective date of CSQM 1 would not be in the public interest. The Board and staff will continue to engage with and support those responsible for developing standards implementation guidance, tools, and training to explore what more can be done to support the implementation of CSQM 1.

April 12, 2022

AASB Decision Summary – March 7-8, 2022

The AASB approved quality management conforming amendments to Other Canadian Standards (OCSs). Two members voted against the conforming amendments.

The AASB unanimously agreed that re-exposing the conforming amendments is not necessary because changes were made in response to comments raised on exposure.

The conforming amendments to the OCSs are effective as follows:

  • For periods beginning on or after December 15, 2022:
    • Canadian Standard on Assurance Engagements (CSAE) 3000, Attestation Engagements Other than Audits or Reviews of Historical Financial Information
    • CSAE 3001, Direct Engagements
    • CSAE 3410, Assurance Engagements on Greenhouse Gas Statements
    • Canadian Standard on Review Engagements (CSRE) 2400, Engagements to Review Historical Financial Statements
    • Canadian Standard on Association (CSOA) 5000, Use of the Practitioner’s Communication or Name
    • Section 5925, An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit Of Financial Statements
    • Section 7060, Auditor Review of Interim Financial Statements
  • For engagements beginning on or after December 15, 2022:
    • CSAE 3416, Reporting on Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting
    • CSAE 3530, Attestation Engagements to Report on Compliance
    • CSAE 3531, Direct Engagements to Report on Compliance
    • Canadian Standard on Related Services (CSRS) 4460, Reports on Supplementary Matters Arising from an Audit or a Review Engagement
    • Section 7200, Auditor Assistance to Underwriters And Others
    • Section 7600, Reports on the Application Of Accounting Principles
    • Assurance and Related Services Guideline (AuG) 6, Examination of a Financial Forecast or Projection Included in a Prospectus or Other Public Offering Document
    • AuG-50, Conducting a Performance Audit in the Public Sector in Accordance with CSAE 3001 
  • For auditor’s consent to the use of the auditor’s report on financial statements for periods beginning on or after December 15, 2022:
    • Section 7150, Auditor’s Consent to the Use of a Report of the Auditor Included in an Offering Document
    • Section 7170, Auditor’s Consent to the Use of the Auditor’s Report in Connection with a Designated Document
  • For periods beginning on or after December 15, 2023:
    • CSRS 4200, Compilation Engagements
    • CSRS 4400, Agreed-upon Procedures Engagements

Once the Auditing and Assurance Standards Oversight Council (AASOC) confirms that the AASB followed due process with proper regard for the public interest, the conforming amendments to OCSs will be issued in the CPA Canada Handbook – Assurance in May 2022.

February 8, 2022

AASB Decision Summary – January 20-21, 2022

The AASB discussed issues related to the proposed conforming amendments to Other Canadian Standards set out in the Exposure Draft, “Quality Management – Conforming Amendments to Other Canadian Standards.”

The AASB is expected to approve the final conforming amendments at an upcoming meeting.

February 8, 2022

AASB Decision Summary – November 29-30, 2021

The AASB discussed stakeholder feedback on its Exposure Draft, “Quality Management – Conforming Amendments to Other Canadian Standards.” Key issues discussed included:

  • the proposed requirement in Canadian Standard on Related Services 4200, Compilation Engagements, to disclose that the practitioner is a member of a firm that applies 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;
  • the effective date of CSQM 1, CSQM 2, Engagement Quality Reviews, and Canadian Auditing Standard (CAS) 220, Quality Management for an Audit of Financial Statements; and
  • the different forms of implementation guidance that can be developed to address implementation challenges related to new or revised requirements in the Other Canadian Standards.

September 9, 2021

AASB Decision Summary – September 9-10, 2021

The AASB received a presentation related to the International Auditing and Assurance Board’s (IAASB) project to make conforming and consequential amendments to its non-International Standards in Auditing (ISAs) as a result of approving the quality management suite of standards. The AASB also received an update on the status of the Exposure Draft, “Quality Management – Conforming Amendments to Other Canadian Standards,” which has a comment deadline of September 30, 2021.

June 29, 2021

AASB Decision Summary – June 7-8, 2021

The AASB approved its Exposure Draft, “Quality Management – Conforming Amendments to Other Canadian Standards,” by email ballot vote. One member voted against approving the Exposure Draft.

The Exposure Draft will be issued in late June 2021, with comments due by September 30, 2021.

May 27, 2021

AASB Decision Summary – May 5, 2021

The AASB reviewed a draft of its exposure draft addressing conforming amendments to Other Canadian Standards, resulting from the January 2021 approval of Canadian Standard on Quality Management 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements.

The AASB is expected to issue the final exposure draft in late June 2021, with comments due by September 30, 2021.

The AASB also discussed its approach to responding to the International Auditing and Assurance Standards Board’s (IAASB) Exposure Draft, “Conforming and Consequential Amendments to the IAASB’s Other Standards as a Result of the New and Revised Quality Management Standards.”

March 15, 2021

AASB Decision Summary – February 16, 2021

The AASB discussed its approach to issuing an exposure draft on conforming amendments to other Canadian standards resulting from the Board’s January approval of 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.

The AASB expects to review an exposure draft at a future meeting.

January 21, 2021

Decision Summary - January 21, 2021

The AASB unanimously approved:

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

CSQM 1 is effective as follows:

  • Firms are required to design and implement their system of quality management for audits or reviews of financial statements or other assurance engagements by December 15, 2022. They are required to be evaluated within one year following December 15, 2022.
  • Firms are required to design and implement their system of quality management for related services engagements by December 15, 2023. They are required to be evaluated within one year following this date. The system of quality management is required to be performed within one year following December 15, 2023.

CSQM 2 is effective for:

  • audits and reviews of financial statements and other assurance engagements for periods beginning on or after December 15, 2022; and
  • 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.

In approving CSQM 1 and CSQM 2, the AASB considered whether to re-expose new or revised Canadian amendments. The deferral of the effective dates of CSQM 1 and CSQM 2 for related services engagements responds to stakeholder concerns heard during consultation. The Board concluded that re-exposure would likely not result in any new information that would change its decision on this matter. Once the Auditing and Assurance Standards Oversight Council (AASOC) confirms that the AASB followed due process with proper regard for the public interest, CSQM 1, CSQM 2, CAS 220, and related conforming amendments to other CASs will be issued in the CPA Canada Handbook – Assurance (the Handbook) in May 2021.

December 15, 2020

AASB Decision Summary – November 30 – December 1, 2020

The AASB discussed Canadian specific issues related to the adoption of International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements, as Canadian Standard on Quality Management (CSQM) 1.

Key issues discussed included:

  • the scope and effective date of CSQM 1; and
  • the different forms of implementation guidance that can be developed to address implementation challenges.

The AASB expects to approve final CSQM 1, CSQM 2, Engagement Quality Reviews, and CAS 220 (Revised), Quality Management for an Audit of Financial Statements, at its January 2021 meeting.

September 23, 2020

AASB Decision Summary – September 9-10 and 23, 2020 Meetings

The AASB discussed, and provided input to the IAASB members from Canada on issues related to:

  • proposed International Standard on Quality Management (ISQM) (formerly International Standard on Quality Control) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
  • proposed ISQM 2, Engagement Quality Reviews; and
  • proposed ISA 220 (Revised), Quality Management for an Audit of Financial Statements.

Key issues discussed included:

  • the placement of material relating to the public interest and whether it is best suited in the objective or introductory section in ISQM 1 and ISA 220; and
  • material relating to human resources, including definitions and using the words “personnel” and “individuals” throughout ISQM 1 and ISA 220.

The AASB also discussed the results of a case study workshop that field tested the proposed requirements in ISQM 1. The feedback will assist the Board in making an informed decision about the scope of proposed Canadian Standard on Quality Management (CSQM) 1, and its potential applicability to related services engagements.

The IAASB approved final ISQM 1, ISQM 2, and ISA 220 (Revised) at its September 2020 meeting. The AASB plans to continue its discussions of key matters relating to the Canadian equivalent standards, including the scope of proposed CSQM 1, at its meeting in December 2020. The Board expects to approve the Canadian standards at its January 2021 meeting.

June 8, 2020

AASB Decision Summary – June 8-9, 2020

The AASB provided input to the IAASB members from Canada on issues related to the IAASB’s project to revise standards for quality management at the firm and engagement level, including engagement quality reviews.

Issues discussed related to proposed International Standard on Quality Management (ISQM) (formerly International Standard on Quality Control) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements included:

  • revising the definition of “quality risk” to include the concept of “reasonable possibility”;
  • replacing all references to “factors” with “conditions, events, circumstances, inactions or actions”;
  • clarifying the risk assessment process through practical examples in the application material; and
  • encouraging the adoption of the suite of quality management standards as a package.

Issues discussed related to proposed ISQM 2, Engagement Quality Reviews included:

  • aligning the IAASB provisions related to the objectivity of the engagement quality reviewer and proposed revisions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards (IESBA Code) addressing objectivity of appropriate reviewers.

Issues discussed related to ISA 220 (Revised), Quality Management for an Audit of Financial Statements included:

  • revising the engagement resources section in ISA 220 (Revised) to account for circumstances where engagement team resources may not be assigned by the firm, but rather obtained directly; and
  • providing a general illustrative example of a situation when resources may not be assigned by the firm, other than that of a group audit engagement.

The AASB also discussed a one-year deferral of the standards’ effective date to December 15, 2022. This would account for COVID-19’s impact on firm activities.

The IAASB expects to approve final proposed ISQM 1, ISQM 2, and ISA 220 (Revised) at its September 2020 meeting. The AASB expects to approve the Canadian equivalent standards at its January 2021 meeting.

 

March 9, 2020

AASB Decision Summary — March 9-10, 2020

The AASB provided input to the IAASB members from Canada on issues related to the IAASB’s project to revise standards for quality management at the firm and engagement level, including engagement quality reviews.

Issues discussed related to proposed International Standard on Quality Management (ISQM) (formerly International Standard on Quality Control) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements included:

  • whether a service provider should be considered as a resource and, therefore, subject to the same requirements as internal firm resources;
  • renaming quality risk considerations introduced in December 2019, including conditions and circumstances, actions and inactions, and events;
  • whether the standard should include examples of how larger firms may apply the requirements, and to examples for smaller firms, in order for firms to compare and contrast;
  • whether specified responses should be included within each component or together in a separate section of the standard; and
  • whether the reference to transparency reports should be in the requirements of the standard or the application material.

Issues discussed related to proposed ISQM 2, Engagement Quality Reviews, included:

  • the cooling-off period for the engagement quality reviewer; and
  • how the firm identifies engagements that should be subject to an engagement quality review.

Issues discussed related to proposed ISA 220 (Revised), Quality Management for an Audit of Financial Statements, included:

  • the definition of “engagement team”;
  • links to proposed ISA 600 (Revised) and proposed ISQM 1; and
  • how the standard addresses scalability.

The IAASB expects to approve final proposed ISQM 1, ISQM 2, and ISA 220 (Revised) at its June 2020 meeting. The AASB expects to approve the Canadian equivalent standards at its September 2020 meeting.

February 6, 2020

AASB Decision Summary — January 23-24, 2020

The AASB decided to conduct additional consultations to assist it in making an informed decision about the scope of proposed 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. Staff will conduct these consultations in the spring and early summer of 2020.

December 23, 2019

AASB Decision Summary — December 2-3, 2019

The AASB provided input to the IAASB members from Canada on issues related to the IAASB’s project to revise standards for quality management at the firm and engagement level, including engagement quality reviews. The Exposure Drafts included:

  • proposed International Standard on Quality Management (ISQM) (formerly International Standard on Quality Control) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
  • proposed ISQM 2, Engagement Quality Reviews; and
  • proposed ISA 220 (Revised), Quality Management for an Audit of Financial Statements.

Issues discussed related to ISQM 1 included: 

  • how the standard should address quality risk considerations;
  • whether responses to quality risks should be included in one section versus within each component; and
  • the factors to be considered in determining an appropriate cyclical basis for selecting completed engagements for inspection. 

Issues discussed related to ISQM 2 included:

  • whether the objective is sufficiently outcome based;
  • how the firm should identify engagements that should be subject to an engagement quality review; and
  • the cooling-off period of the engagement quality reviewer.

Issues discussed related to ISA 220 (Revised) included:

  • whether the definition of engagement team should include component auditors;
  • whether the proposed standard should include application material on evolving audit delivery models; and
  • clarifying which requirements must be performed by the engagement partner and those where other members of the engagement team can assist the engagement partner.

The Board will continue to discuss these and other issues at future meetings.

September 10, 2019

AASB Decision Summary – September 9-10, 2019 Meeting

The AASB provided input to the IAASB members from Canada on issues related to the feedback received on the IAASB’s Exposure Drafts for quality management at the firm and engagement level, including engagement quality reviews. The Exposure Drafts included:

  • proposed International Standard on Quality Management (ISQM) (formerly International Standard on Quality Control) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
  • proposed ISQM 2, Engagement Quality Reviews; and
  • proposed ISA 220 (Revised), Quality Management for an Audit of Financial Statements.

The AASB discussed the following key issues:

  • whether the IAASB should issue a survey and conduct additional outreach on the possibility of developing a separate quality management standard for related service engagements;
  • developing higher-level quality objectives to enhance scalability in proposed ISQM 1, adding risk considerations and clarifying required responses to assessed risks;
  • removing the concept of entities with “significant public interest” in proposed ISQM 2; and
  • including component auditors in the definition of engagement team in proposed ISA 220 and;
  • clarifying the requirements in proposed ISA 220 that must be performed by the engagement partner and those where other members of the engagement team can assist the engagement partner.

June 25, 2019

AASB Decision Summary — June 25, 2019 Conference Call

The AASB discussed its draft response letters to the IAASB’s Exposure Drafts for “Quality Management at the Firm and Engagement Level, Including Engagement Quality Reviews,” which includes:

  • proposed International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
  • proposed ISQM 2, Engagement Quality Reviews; and
  • proposed ISA 220 (Revised), Quality Management for an Audit of Financial Statements.

The Chair and Director will review the final letters prior to submission.

The AASB agreed to perform further consultations with stakeholders on the proposed scope of 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, in the fall of 2019.

June 10, 2019

AASB Decision Summary — June 10-11, 2019

The AASB discussed its draft responses to the IAASB’s “Exposure Draft for Quality Management at the Firm and Engagement Level, Including Engagement Quality Reviews” which includes:

  • proposed International Standard on Quality Management (ISQM) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
  • proposed ISQM 2, Engagement Quality Reviews; and
  • proposed ISA 220 (Revised), Quality Management for an Audit of Financial Statements.

The AASB will review draft response letters at its conference call on June 25, 2019. The Chair and Director will review the final responses before submission.

February 11, 2019

AASB Decision Summary — January 24-25, 2019

The AASB unanimously approved the exposure draft of proposed 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; and CAS 220, Quality Management for an Audit of Financial Statements. The exposure draft is based on the International Auditing and Assurance Standards Board exposure draft of proposed International Standard on Quality Management (ISQM) 1, ISQM 2, and International Standard on Auditing (ISA) 220. The exposure draft for CSQM 1 proposes to adopt the same scope as ISQM 1. This would be a significant change in Canada because the current Canadian standard does not apply to related services engagements such as compilation and agreed-upon procedures engagements. The Board expects to issue the exposure draft in late March 2019, with a comment deadline of June 7, 2019.

Disclaimer

This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal voting process.