Accounting, Auditing & Financial Reporting (AAFR)

Rethinking Audit Quality: What SQMS No. 1 Means for Your Firm

Starting December 15, 2025, accounting firms will need to follow Statements on Quality Management Standards (SQMS) No. 1, a new rule from the AICPA that helps firms improve how they manage audit quality.

1. What’s Changing?

Instead of following fixed procedures, firms now need to build a custom system that identifies risks to quality — and shows how they’re addressing those risks. That means reviewing how your team handles ethical issues, client relationships, engagement performance, staffing, and more.

2. What’s Required?

Firms must:

· Set quality goals

· Spot risks that could affect those goals

· Document the firm’s planned responses and controls for each identified quality risk

· Review their system every year

Why It’s a Big Deal

SQMS No. 1 is designed to be flexible — whether you’re a solo CPA or a large firm. It helps ensure consistent, ethical, high-quality work across every engagement.

Helpful resources:

· AICPA’s Practice Aid for SQMS No. 1
· Journal of Accountancy Implementation Checklist
· Thomson Reuters SQMS Toolkit
 

Please send your questions and comments to info@riscpa.org