The path to Quality Management: Finding a place to rest

November 16, 2023

By Ross H. Roye, CPA

PERFECTION will hold you back in this endeavor as perfection can be overwhelming to obtain. Perfection is the bullseye of the Quality Management (QM) target that we strive to hit. It will take practice to hit perfection, rarely will it be hit on the first try. Our aim must be for continuous improvement with each step we take on the path to QM.

In this article, I will relay information from the 2023 AICPA Peer Review Conference, remind everyone what QM should be about and come to a place of rest on the subject of QM (if only for a little while). Until we get more information on the implementation expectations from the AICPA, I will hold off on this subject. I do not intend this article to be a technical update or a help and how-to article. I will start by sharing what is top of mind concerning QM.

My mind seems to work like a lottery ball stirring machine that spits out my own personal winning numbers 85% of the time, every time…There are seemingly an infinite number of thoughts swirling around in my head at any given moment. If I concentrate on something, a ball comes up a tube and sticks the idea in my head. With this visualization swirling around your mind, here are my thoughts on the new QM standard:

Get started, slow down, hurry up, ask for help, am I on track, share ideas, use the AICPA resources, get started, do this all yourself no one else can know your firm, all firms are basically the same, read the standard again, hurry up, do it right, don’t screw up… And the swirl of ideas continues, but when I focused myself, the following thoughts did stand out.

How does QM help our entire profession?

Many of you may feel like this is a bunch of gyration with no movement. The current Quality Control (QC) standard is rigid in the approach firms take to control quality. The change to a QM approach allows for a tailored system that fits the specific needs of each firm. With QC standards being prescriptive, all firms are required to have the same QC processes whether the firm has 100 employees that do only audits, or the firm has 2 employees that do only compilation engagements. Also, the QC standards are 20 years old and the update to the QM system will help firms better address the current technological climate.

Who is affected by this change?

I want to continue to remind you that the new QM Standards affect every firm with an audit or accounting practice, not just firms that have a peer review. Every firm performing engagements in accordance with the SASs, SSARSs and SSAEs must follow these new standards. In addition, I need to state that the old QC Standards will remain in effect for your firm until your firm has adopted the QM Standards. Early adoption is permitted, but you must adopt the entire suite of standards early, and I do not recommend doing that.

Who owns the conversion process?

Ultimately the head owner of the practice owns the responsibility. Sole proprietor, managing partner, CEO…whoever is on the top of the list is the responsible party. They may assign this task to the quality manager of the firm, but that does not take away that ultimate responsibility.

How to get started?

Gain an overall understanding of the standards. The AICPA has developed the

following resources to help you as well: Executive summaries of the standards, comparison of extant and new AICPA quality management standards, AICPA webcasts, AICPA practice aids (coming this fall) and CPE courses.

Discuss the plan for implementation with the relevant parties in your firm. Just a few topics that were noted at the AICPA Peer Review conference associated with implementation: Who will lead the implementation process? What resources will be needed for successful implementation? What will the firm’s documentation look like? What will the process for ongoing monitoring and remediation look like?

Effective date?

Firms must have completed the risk assessment and implemented the risk response, such that the system is operational, BY Dec. 15, 2025. This is not as far off as it looks.

What is the documentation I keep hearing about in association with QM?

As you think about the risk assessment process and the process for ongoing monitoring and remediation, you realize you will have to be able to test the system at some point. What do you need to test a system? Documentation! You cannot monitor what is between a person’s ears.  We are not required to document every single consideration or step, but it may be helpful to document reasons for conclusions about risks. Documentation will differ based on firm’s complexity. Less complex firms may include lists of the quality objectives and quality risks, and a memorandum that explains the responses and how they address the quality risks. More complex firms may need to be more detailed in documentation of quality objectives and risks to quality, as well as the related responses to address those quality risks.

Is my firm going to be the first one done with this project?

No, you will not be the first. Firms that comply with international standards have implemented QM systems already. The international standards are a bit more constrictive than our standards.  

There are never enough words available to me in these articles. So, in closing I want to share some lessons learned and a quote.

Selected lessons learned from the AICPA Peer Review conference:

  • There is an increased expectation regarding documentation. It will not be sufficient for firms to have procedures in place. Firms need to be able to document what the procedures are and how those procedures (controls) address specific risks.
  • Firms with multiple offices may be operating differently. Firms should be sure documentation covers the differences in operation.
  • Excel may not be the right tool for all firms, but it may work for your firm. I think the AICPA tool kit, coming out fall 2023 I hear, will have an excel file template.
  • Firms must have a formal process for monitoring.
  • You will have findings, and the findings need to be compiled by period depending on the monitoring frequency.
  • Individuals in the monitoring function should be as independent as possible. You may need to hire outside parties to help.

“Don’t strive for perfection in the first year. Aim for continuous improvement year after year.” Liz Gantnier, CPA, CGMA

For more information and to stay up to date on the QM standards, visit the following link: https://www.aicpa.org/topic/audit-assurance/quality-management

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Ross H. Roye, CPARoss H. Roye, CPA, is a shareholder of Gray, Blodgett & Company, PLLC, and has been with the firm since 2006. He currently serves as the chair of the OSCPA Peer Review Committee. Roye has previously served on the OSCPA Board of Directors as a director at large, as well as the Society’s New CPA, Financial Literacy and Accounting Careers Committees. He was honored as an OSCPA Trailblazer in 2012. Roye is a Past President of the OSCPA’s Norman Chapter and was selected as the Chapter’s Distinguished CPA in 2014.