What is System of Quality Management

The Statements on Quality Management Standards (SQMS) represent one of the most important shifts in how audit and assurance firms are expected to manage quality.

SQMS is not just a replacement for the old quality control mindset.

It introduces a risk based, proactive, and continuous quality management approach.

A good example of this evolution is the AICPA practice aid on Monitoring and Remediation for a Firm’s System of Quality Management, which explains how SQMS should work in practice.

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SQMS requires firms to:

➡️ design,

➡️ implement,

➡️ operate,

➡️ and continuously improve

a system of quality management tailored to their:

➡️ size,

➡️ structure,

➡️ services,

➡️ and risk profile.

Unlike the old “one-size-fits-all” quality control approach, SQMS focuses on:

➡️ identifying quality risks,

➡️ designing quality responses,

➡️ and continuously evaluating whether those responses actually work.

Monitoring & Remediation

One of the most critical components of SQMS is the monitoring and remediation process.

According to the AICPA guidance, monitoring is designed to provide:

➡️ relevant,

➡️ reliable,

➡️ and timely information

about whether the system of quality management is:

➡️ properly designed,

➡️ effectively implemented,

➡️ and operating as intended.

Continuous Monitoring

Monitoring includes:

➡️ ongoing activities embedded in daily operations,

➡️ periodic inspections of completed engagements.

Findings vs. Deficiencies

Not every finding is a deficiency.

SQMS requires firms to:

➡️ evaluate findings,

➡️ assess severity and pervasiveness,

➡️ determine whether a true deficiency exists.

RCA

Firms must understand:

➡️ why a deficiency occurred,

➡️ not just what went wrong.

Remediation

Firms must:

➡️ design remedial actions,

➡️ implement them,

➡️ and evaluate their effectiveness.

Governance

The guidance strongly emphasizes:

➡️ leadership accountability,

➡️ governance structures,

➡️ resource allocation,

➡️ and quality culture.

Third Parties

Even when a firm is part of a network or uses external service providers:

➡️ responsibility for quality remains with the firm.

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Author: Sebastian Burgemejster