IFAC SMP Committee Comment Letter on the IAASB Exposure Draft for Proposed International Standard on Quality Management 1

The SMPC generally supports the new quality management approach using a risk management lens. However, the Committee also believes that the IAASB needs to consider the cost/benefit of the proposed changes in terms of anticipated quality increase from International Standard on Quality Management 1 (ISQM 1). The SMPC believes that making the standard less complex to apply would go a long way in addressing the practical issues many SMPs would otherwise face and, simultaneously, resolve many of the scalability issues. Specifically by:

1. determining a more appropriate (i.e., higher) threshold for risk identification and assessment (instead of “more than remote likelihood of occurrence”) – preferably one that takes both the likelihood of occurrence and likely magnitude of impact into account, and
2. setting far fewer and less granular objectives – in other words, setting a more appropriate objective for the standard as a whole, aligning quality to the firm’s individual strategy with just a single objective, preferably for each relevant area that drives quality (i.e., personnel, IT applications etc.).

It is also likely that many smaller firms will benefit from assistance from their PAOs and other third parties for QM system support and methodologies. The SMPC is available to support implementation initiatives and IFAC will coordinate with the IAASB when revising the previous QC Guide as the standard progresses to its approval stage.