SQM1 & EQCM Complete Guide for Indian CA Firms [2026]
The SQM1 deadline is July 1, 2026. From that date, every Indian CA firm must have a functioning quality management system aligned to ICAI's Service Quality Management Standard 1 (SQM1). This is not optional and it is not a grace period extension of ISA 220 — SQM1 has specific, documented requirements that firms must meet.
This hub page is your complete resource for SQM1 and EQCM compliance. Every topic is linked to a detailed guide.
What Is SQM1?
SQM1 (Service Quality Management 1) is ICAI's quality management standard for audit firms, effective July 1, 2026. It replaces and expands on ISA 220 (Quality Control for an Audit of Financial Statements).
SQM1 requires firms to:
- Establish quality objectives across five areas: ethical requirements, client acceptance, human resources, engagement performance, and monitoring/remediation
- Design and implement quality responses to address risks to those objectives
- Operate the quality management system as an ongoing function (not a one-time compliance exercise)
- Monitor the system through annual evaluations and periodic file reviews
- Conduct EQCM (Engagement Quality Control Reviews) for significant engagements before the opinion is signed
How SQM1 Differs from ISA 220
| Requirement | ISA 220 | SQM1 |
|---|---|---|
| Quality system scope | Engagement-level | Firm-level + engagement-level |
| Quality objectives | Not structured | Five explicit quality objectives |
| Risk-based approach | Partial | Explicit — firms must identify quality risks |
| Monitoring | Annual file review | Ongoing + annual evaluation |
| EQCM threshold | Significant engagements | Defined criteria — listed, PIEs, new complex |
| Documentation | Engagement file | Firm-level system documentation |
The key shift: ISA 220 was engagement-centric. SQM1 requires the firm to have a documented, operating quality management system at the firm level.
The Five Quality Objectives Under SQM1
1. Ethical Requirements
The firm must have policies ensuring all partners and staff understand and comply with independence requirements, confidentiality obligations, and ICAI code of ethics.
2. Client and Engagement Acceptance
The firm must have procedures to evaluate whether new and continuing engagements are appropriate — client integrity, firm competence, independence threats, resource availability.
3. Human Resources
The firm must ensure adequate assignment of competent personnel to engagements, appropriate supervision, and professional development.
4. Engagement Performance
The firm must have policies for consistent, quality engagement performance — planning, direction, supervision, review, consultation on difficult matters.
5. Monitoring and Remediation
The firm must have ongoing monitoring — periodic file reviews, assessment of EQCM process, root cause analysis of deficiencies, remediation.
EQCM Requirements Under SQM1
Engagement Quality Control Monitoring (EQCM) reviews are required for:
- Audits of listed entities (mandatory)
- Audits of public interest entities
- Engagements where the firm designates EQCM as required based on risk
The EQCM process:
- The EQCM reviewer is independent of the engagement team
- Review occurs before the audit opinion is signed
- Scope covers: significant judgments, accounting estimates, financial statement disclosures, audit documentation, independence
- The reviewer documents their review and conclusion
- If the reviewer has unresolved concerns, the opinion cannot be signed
SQM1 Resources — Complete Guide Set
Understanding SQM1
-
ISA 220 vs SQM1: Transition Guide for Indian Auditors [2026] — What changes, what stays the same, 6-month implementation roadmap
-
SQM1 Implementation Roadmap: From ISA 220 to ICAI Standards [2026] — Step-by-step implementation plan for CA firms at different stages
-
SQM1 & EQCM FAQs: Transition, Requirements & Documentation [2026] — 25 frequently asked questions answered in detail
EQCM Procedures
-
EQCM Review Procedures: NFRA-Defensible Documentation [2026] — What the EQCM reviewer must do, what they must document
-
EQCM Guide: Engagement Quality Control for Indian Audit Firms — Implementation steps and SQM1 alignment
Templates and Downloads
-
EQCM Review Memo Template: SQM1 Engagement Quality Control Review — Ready-to-use memo template covering all required sections
-
SQM1 Quality Objectives Template: Firm-Level Quality Management — Document all five quality objectives per ICAI requirements
Broader Quality Context
-
ISA 220 & SQM1 Quality Management Implementation Guide for Indian Audit Firms — How to turn quality management from compliance burden to competitive advantage
-
Audit Quality Management: SQM1 & EQCM Framework — Framework overview for CA firm leadership
SQM1 Implementation Timeline
If you are starting now (March 2026):
Month 1 — Assessment: Document current quality management practices. Identify gaps against SQM1's five objectives.
Month 2 — Design: Develop firm-level quality management policies. Draft EQCM procedures. Create documentation templates.
Month 3 — Implementation: Train partners and senior staff. Conduct pilot EQCM on one significant engagement.
Month 4 — Testing: Review pilot EQCM documentation. Identify gaps. Refine procedures.
Month 5 — Deployment: Roll out to all significant engagements. Begin monitoring system.
Month 6 (June 30 deadline): Firm-level quality management system operational and documented.
The Technology Question
SQM1's monitoring requirements — ongoing file reviews, EQCM documentation, remediation tracking — benefit from systematic technology support. Manual quality management systems are difficult to sustain consistently, particularly in smaller firms where the same partner is managing clients, supervising staff, and running the quality system.
Audit platforms with integrated SQM1 workflow features automate the documentation aspects — EQCM memo templates, quality objective documentation, monitoring checklists — while keeping the professional judgment requirements with the CA.
Related Resources
- 5 NFRA Inspection Findings That Audit Automation Prevents
- Why Coraa Uses Deterministic AI — And Why That Matters for Statutory Audit
About Coraa
Coraa provides SQM1/EQCM workflow documentation as part of its full-stack audit platform — EQCM memo templates, five-quality-objective documentation, monitoring checklists. Combined with 100% population testing and auto-generated working papers, Coraa gives firms both the engagement quality and the firm-level quality management infrastructure SQM1 requires.
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