The Institute of Chartered Accountants of India ( ICAI ) has issued two new standards, SQM 1 (Standard on Quality Management) and SQM 2, along with a revised SA 220 (Standard on Auditing).
SQM 1 outlines a firm’s responsibility to establish policies and procedures for quality management across all engagements, including audits, reviews of financial statements, and other assurance services and applies to all firms performing audits, financial statement reviews, or assurance services, requiring a quality management system for consistent engagement performance.
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SQM 2 focuses on the appointment and qualifications of the engagement quality reviewer, as well as the review process and its documentation and also governs engagements needing an engagement quality review, based on SQM 1 compliance, and must align with ethical standards.
Recommendatory:
Systems of quality management in compliance with this SQM should be designed and implemented by April 1, 2025. The evaluation of the quality management system, as required by paragraphs 53–54 of this SQM, should be completed within one year of this date.
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Mandatory:
Systems of quality management in compliance with this SQM must be designed and implemented by April 1, 2026. The evaluation of the quality management system, as required by paragraphs 53–54 of this SQM, must be conducted within one year of April 1, 2026.
Recommendatory:
This SQM is effective for:
(a) Audits and reviews of financial statements for periods starting on or after April 1, 2025; and
(b) Other assurance and related services engagements beginning on or after April 1, 2025.
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Mandatory:
This SQM is effective for:
(a) Audits and reviews of financial statements for periods starting on or after April 1, 2026; and
(b) Other assurance and related services engagements beginning on or after April 1, 2026.
The ICAI has clarified that the existing standard, SQC 1, will remain in effect until the new standards come into force. SQC 1 can be accessed on ICAI’s website via the following link: https://resource.cdn.icai.org/15366Link1.pdf
Please note that these standards also include conforming amendments to various other standards. You can get the standards below:
SQM 2: Engagement Quality Reviews
Conforming Amendments to Other Standards arising from SQM 1, SQM 2 and SA 220(Revised)
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