A recent Journal of Accountancy article discusses how firms can implement the American Institute of Certified Public Accountants' (AICPA) Statement on Quality Management Standards (SQMS) No. 1. Issued by the AICPA Auditing Standards Board and Accounting and Review Services Committee in June 2022, the standards mandate a risk-based approach to developing audit quality management systems.
SQMS No. 1 requires that audit firms evaluate their audit findings, identify deficiencies in their quality management systems, and assess how severe and pervasive those deficiencies are. As a part of this process, firms must investigate the root causes of identified shortcomings. They can also explore the root causes of positive outcomes and use them to enhance their audit quality in the future.
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