ISSAI - 140 - Quality Management for SAIs

Summary

In December 2020, the IAASB issued a new suite of quality management standards (ISQM 1 and ISQM 2) replacing the extant ISQC 1 and revised its ISA 220 standard (Quality management for an audit of financial statements). The new standards are effective as of December 15, 2022. The changes emphasise that the auditor’s objective is about managing quality and associated procedures in a risk-based and dynamic way in order to achieve the required level of quality, rather than implementing a defined set of quality control procedures. These changes and revisions implied that a revision of the associated content of the IFPP, notably ISSAI 140, was needed.

The new revised version of ISSAI 140 demonstrates how SAIs are free to design, implement and operate a system of quality management taking into account their changing nature and circumstances. SAIs will manage their system of quality management in a dynamic way, by adapting it to changes in the nature and circumstances of the SAI and its engagements.

In the standard, SAIs need to produce high quality work to meet both their strategic objectives and their mandate. This is in line with the Rio Declaration and other INTOSAI initiatives that encourage SAIs to make an impact through their audits. To achieve either objective requires work to be of a desirable level of quality to meet or exceed the expectations of their stakeholders.

ISSAI 140 is applicable to all types of engagements covered by the ISSAIs. ISSAI 140 may also be used for jurisdictional and other activities carried out by the SAI.

The proposed ISSAI 140 has been built around seven organisational requirements, reflecting the quality management process:

1. establishing the system of quality management;
2. establishing quality objectives;
3. identifying and assessing quality risks;
4. designing and implementing responses;
5. monitoring the system of quality management and remedying identified deficiencies;
6. evaluating and concluding on the effectiveness of the system of quality management; and
7. documenting the system of quality management.

For each of these organisational requirements, the new ISSAI 140 identifies the key high-level requirements from ISQM 1 and adapts them to the SAI context. This allows flexibility to SAIs while effectively resulting in SAIs applying most of what is actually required by ISQM 1.