ICAI Defers Mandatory Effective Date of SQM 1 and SQM 2 Standards:

ICAI Defers Mandatory Effective Date of SQM 1 and SQM 2 Standards The Auditing and Assurance Standards Board under the Institution of Chartered Accountants of India (ICAI) recently issued an important announcement regarding the deferment of the effective date of SQM 1 and SQM 2. The ICAI has announced that the existing Standard on Quality Control (SQC) 1 will continue to remain in force until further notice. SQC 1, which was originally issued in October 2007, applies to firms conducting audits, reviews of historical financial information, and other assurance and related services engagements. It has been effective for accounting periods beginning on or after April 1, 2009.

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Earlier, on October 14, 2024, ICAI had introduced the following two new standards on quality management, SQM 1 and SQM 2: SQM 1, "Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements" and SQM 2, "Engagement Quality Reviews". These new standards were scheduled to become mandatory from April 1, 2026. Upon their coming into effect, they were set to replace the existing SQC 1 framework. However, the ICAI examined the matter at its 451st Council Meeting held on 30 and 31 March 2026 and decided to defer the compulsory implementation date of SQM 1 and SQM 2.

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ICAI added that until it issues a fresh announcement, firms are required to continue complying with the existing SQC 1 standard. Note: The new standards will now come into effect at a later date, which will be announced separately by ICAI.