The ISQM 2 comes into effect on 15 December 2022. It relates to what used to be called ‘engagement quality control reviews’.

These are now called ‘engagement quality reviews’ also known as Engagement Quality Review (EQR or EQ review). These are also referred to as Hot File Review.

The main changes are as follows:

  1. The standard require the reviewer to challenge the engagement partners’ judgments much more than in the previous requirements. In the past, reviews have sometimes focused on process more than on assessing the quality of judgments.
  2. The scope of the standard, at least for small and medium firms with non-PIE or listed audits states that reviews should be required:
    • for ‘other engagements’ that are required by law or regulation; and
    • audits and other engagements that the firm itself determines should be reviewed in response to a specific ‘quality risk’.

These types of audit engagement could include those where there are:

    • high levels of complexity or judgment;
    • un-remediated deficiencies in internal control at the audit firm;
    • there are recurring inspection findings on the audit; and
    • engagements for new clients where there were disagreements with the previous auditor.

Some firms that didn’t need an EQ review in the past may need one in the future as the scope for avoiding one will probably be narrower. However the implications are not clear. It will ultimately depend on individual firms’ assessment of their quality risks and the types of appropriate responses to such risks which may include an EQ review.

Who can carry out the EQR?

Reviewers will need sufficient seniority/experience, with sufficient time and resources allowed to do the job properly.

With ever-increasing emphasis on quality generally within firms and the adverse consequences associated with quality failings, it seems likely that the role of EQ reviewer will be an even more challenging one in future.

As regards documenting Audit Firms’ statement of Quality Management (SoQM), We typically tailor training and brainstorming sessions to suit your firm’s unique requirements.

For more assistance please see our new ISQM TOOLKIT or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please call or e-mail John McCarthy FCA or e-mail him at

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