The AICPA’s Statements on Quality Management Standards (SQMS) represent a significant overhaul of the quality control framework for CPA firms, shifting from a rules-based to a risk-based quality management framework. The SQMS have an effective date of Dec. 15, 2025, and few firms are ready. 

The AICPA’s Statements on Quality Management Standards (SQMS) have an effective date of Dec. 15, 2025. This date is fast approaching, and few firms are prepared.

Since the SQMS were issued in June 2022, the AICPA has produced a plethora of related content. This blog is not intended as a treatise on the SQMS; instead, it is a brief overview of the SQMS with some risk management tips intended to motivate you to make progress on modifying your firm’s system of quality management.

Overview

The SQMS represent a significant overhaul of the quality control framework for CPA firms, shifting from a rules-based to a risk-based quality management framework. The standards are designed to ensure that firms establish, implement, and maintain effective systems of quality management tailored to their unique circumstances and engagements.

The image and items listed below are components of the new SQMS, initially introduced when the International Auditing and Assurance Standards Board rolled out its quality management standards. Three components are elements of existing quality control standards (QCS); three are renamed and expanded elements of the soon to be replaced QCS; and two new components are COSO components not addressed in the extant QCS.

Firms are not required to implement the standards before Dec. 15, 2025, but all standards applicable to your firm must be implemented by that date. Firms that perform services in accordance with Statements on Auditing Standards, Statements on Standards for Accounting and Review Services, or Statements on Standards for Attestation Engagements must design and implement their systems of quality management in compliance with the SQMS. You probably should already have begun this process.

The initial evaluation of your firm’s designed system of quality management is to be performed during the year ending Dec. 15, 2026, and annually thereafter, to assess whether the system meets its quality objectives.¹

Risk Management Tips

The clock is ticking. Though not meant to be all-inclusive, consider the following risk management tips and best practices as December approaches:

• Don’t let “perfect be the enemy of good.” If unchecked, a fixation on perfection creates crippling inertia. Understand that a system of quality management is an evolving, iterative, dynamic process. Learn from the process, share information with your team, and use that information to improve your system of quality management.
• Seek your peer reviewer’s guidance. Your peer reviewer’s familiarity with your quality control system and understanding of the new standards can be instrumental in assisting you with designing your system of quality management. Ask what tools your peer reviewer believes would be beneficial for you. Ideally, you can obtain your peer reviewer’s insight and tips specific to your unique needs. However, do not rely too heavily on your peer reviewer (unless you are willing to secure the services of another one) because doing so could threaten their independence.
• Consider having a senior member of your system of quality management development team lead brainstorming sessions. These sessions should take a two-phased approach. During the initial phase, the discussion leader should encourage and reinforce that this phase is exclusively for the generation of ideas and that there will be no evaluation or criticism of ideas raised. It is during the second phase that the team will evaluate or constructively critique aspects of the initial brainstorming phase. This two-phase approach encourages team members to offer a greater number of suggestions as well as more-nuanced proposals that might otherwise not be captured and considered in the development of your system of quality management.
• Consider supplementing your external resources by collaborating with other practitioners with similar practices.
• Don’t overcomplicate your transition process or try to address every potential risk. Instead, focus on the quality risks that are material, relevant, or of higher risk to your firm; the types of industries, businesses, and organizations you serve; and the services you offer.
• SQMS No. 1 indicates that root cause analyses should be performed by people responsible for the firm’s system of quality management. But to maintain objectivity, you should take care to avoid assigning individuals to perform root cause analyses that are on engagements being reviewed.

Root cause analysis can be complicated, but don’t get lost. Keep it as simple as possible. Now may be a good time to reacquaint yourself with (or to discover) the “Five Whys Technique,” which involves repeatedly asking “why” to identify a problem’s root cause. The technique can help you and your firm evaluate and avoid overlooking the root causes of identified deficiencies in the system of quality management.

As with the existing QCS, the SQMS require you to document your system of quality management. As before, that documentation may be used by your peer reviewer to assess whether your firm has complied with the standards. If documentation indicates your firm will perform procedures exceeding those required by professional standards, those elevated requirements will be the benchmark used to assess your compliance. So, take care in documenting your firm’s quality objectives, quality risks, your responses to those risks, and ultimately your system of quality management. Be sure to identify those responsible and accountable for your system.

You can keep up to date with developments in the quality management standards and take advantage of resources developed by the AICPA's webpage, A Journey to Quality Management. Firms encountering challenges with the transition should consider seeking external support. They may benefit from engaging entities that specialize in offering tailored assistance with the implementation of the quality management standards.

¹ Quality objectives: The desired outcomes in relation to the components of the system of quality management to be achieved by the firm.

Duncan Will, CPA, ABV, CFF, CFE, is a loss prevention director and accounting and auditing specialist with CAMICO. He advises policyholders through the CAMICO Loss Prevention hotline and speaks to CPA groups on a wide range of topics.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of the PICPA's officers or members. The information contained herein does not constitute accounting, legal, or professional advice. For actionable advice, you must engage or consult with a qualified professional.