ISQM 1 Relevant ethical requirements

ISQM 1 Relevant ethical requirements

The difference with ISQC 1

ISQC 1 included specific requirements regarding information and communication related to independence (e.g., requirements to have policies and procedures dealing with communication of independence requirements engagement partners providing relevant information, or personnel notifying the firm of threats to independence or breaches of independence).

The firm's SOQM would still need to address the information and communication related to independence, but it is dealt with through the information and communication component of ISQM 1.

ISQC 1 included requirements to have specific policies and procedures related to the long association of personnel. The requirement was not retained in ISQM 1. However, the firm's SOQM would need to still address the long association of personnel taking into account the provisions of the relevant ethical requirements, since the quality objectives in ISQM 1 deal with the fulfilment of relevant ethical requirements.

Relevant ethical requirements

  1. Adjusted to principles-based requirements to establish quality objectives addressing the fulfilment of responsibilities in accordance with relevant ethical requirements, including those related to independence.

  2. Increased focus on all relevant ethical requirements (i.e., not just independence).

  3. Improved clarity regarding the extent to which the SOQM needs to address the relevant ethical requirements that apply to others outside the firm (ie., the network, network firms, individuals in the network or network firms, or service providers).

  4. Improved clarity regarding the scoping of the relevant ethical requirements in the context of the SOQM.

Final words

It is best practice for the firm to consider who is involved in the firm's engagements and performing activities for the SOQM, and how relevant ethical requirements may affect them.

The responses designed and implemented by the firm to address others' fulfilment of relevant ethical requirements will likely differ from the responses designed and implemented by the firm to address personnel's fulfilment of relevant ethical requirements. For example, in relation to understanding the relevant ethical requirements:

The firm's personnel may be subject to regular training on the relevant ethical requirements.

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