Statement on Quality Management Standards (SQMS) No. 1 introduces new requirements for how CPA firms obtain, use, and oversee Quality Management Materials (QMM). Learn what has changed, firm responsibilities, and how QMM fits into an effective system of quality management.
Focus Keywords
Quality Management Materials QMM
SQMS No. 1
system of quality management SQM
QM standards CPA firms
peer review QMM requirements
AICPA quality management standards
intellectual resources audit firms
Statement on Quality Management Standards (SQMS) No. 1, A Firm’s System of Quality Management, represents a fundamental shift in how CPA firms design, implement, and maintain quality control. Issued in June 2022 and required to be implemented by December 15, 2025, the standard emphasizes proactive risk assessment and continuous monitoring across firm operations.
A critical component of SQMS No. 1 is the use of intellectual resources, commonly referred to as Quality Management Materials (QMM). These materials play a central role in supporting consistent engagement quality, but firms must now take a more deliberate and accountable approach to how QMM are selected, maintained, and used.
This article explains how QMM fit into a firm’s system of quality management, what responsibilities remain with the firm even when using third-party materials, and practical considerations under the new peer review environment.
SQMS No. 1 and the Role of QMM
SQMS No. 1 requires firms to establish quality objectives related to the resources used in performing engagements. Specifically, QM 10.33(g) requires firms to ensure they are obtaining, developing, implementing, maintaining, and using intellectual resources appropriately to support their system of quality management (SQM).
These intellectual resources include items such as:
Engagement work programs
Audit and accounting checklists
Sample confirmations and letters
Practice aids and templates
Collectively, these resources are commonly referred to as Quality Management Materials (QMM).
Importantly, QMM must not only support engagement performance but also comply with all applicable professional standards and legal and regulatory requirements.
Firm Responsibility Does Not Transfer to the Provider
QM 10.A110 clarifies that intellectual resources may be obtained from a service provider. However, the CPA firm remains fully responsible for its system of quality management, even when using third-party QMM.
This means firms must ensure that the QMM they use are:
Appropriate for the firm’s practice and engagement types
Updated for current professional standards
Properly implemented and tailored when necessary
Reliance on externally developed materials does not eliminate the firm’s responsibility for quality management outcomes.
Assigning Accountability for QMM
Under SQMS No. 1, firms are encouraged to assign clear accountability for QMM oversight. Best practice is to designate a partner or senior leader responsible for:
Evaluating whether QMM are complete and appropriate
Ensuring materials are updated for new standards
Tailoring or supplementing QMM to fit firm-specific risks
Monitoring effectiveness and usability
QMM that are too simplistic may fail to address applicable standards, while overly complex materials can introduce inefficiencies and reduce engagement effectiveness. Firms should strive for QMM that are complete, scalable, and fit for purpose.
QMM Provided by Service Providers
Many CPA firms rely on third-party providers for audit and accounting guidance and practice aids. Under SQMS No. 1, these providers are considered service providers within a firm’s SQM framework.
For example, guidance and practice aids offered by established publishers may qualify as QMM and serve as intellectual resources supporting engagement quality. However, firms must still assess whether these materials align with their specific engagement risks and firm structure.
Changes Under New Peer Review Standards
A significant change affecting QMM is the elimination of prior peer review options for quality control materials (QCM). Under previous standards, providers of QCM could undergo peer review of their development and maintenance systems, giving firms a level of assurance if the provider received a pass rating.
Under the new peer review standards, this option has been eliminated.
Instead, providers of QMM may now elect to undergo assertion-based examination engagements under the attestation standards, using QMM criteria established by the AICPA. These examinations can provide CPA firms with additional insight into whether the materials are appropriate for use within their SQM.
Practical Implications for CPA Firms
Firms implementing SQMS No. 1 should take proactive steps to evaluate their use of QMM, including:
Inventorying all intellectual resources used in engagements
Confirming materials are aligned with current professional standards
Assigning responsibility for QMM oversight and updates
Assessing whether third-party materials require firm-specific tailoring
Documenting how QMM support quality objectives within the SQM
As peer review approaches under the new standards, firms should expect increased focus on how QMM are selected, maintained, and monitored as part of the overall quality management system.
SQMS No. 1 significantly elevates the role of Quality Management Materials within a CPA firm’s system of quality management. While firms may continue to rely on third-party providers for guidance and practice aids, ultimate responsibility for engagement quality and compliance remains firmly with the firm.
By thoughtfully evaluating, tailoring, and overseeing QMM, CPA firms can strengthen their SQM, improve engagement consistency, and better position themselves for peer review under the new standards. Proactive planning now will help firms meet the December 2025 implementation deadline with confidence and clarity.
