SQM1 & EQR Complete Guide for Indian CA Firms [2026]
SQM1 does not currently have a mandatory effective date. ICAI originally scheduled SQM 1 and SQM 2 (Standards on Quality Management, issued October 2024) to become mandatory from 1 April 2026. At its 451st Council Meeting (30–31 March 2026), ICAI deferred that mandatory date indefinitely, "until further announcement." The extant SQC 1 continues to apply until then. Firms that were already building a quality management system ahead of the original date aren't wasting the work — SQM 1 will eventually apply, and the deferral is about timing, not scope.
This hub page is your complete resource for SQM1 and engagement quality review compliance. Every topic is linked to a detailed guide.
What Is SQM1?
SQM 1 (Standard on Quality Management 1) is ICAI's firm-level quality management standard for firms performing audits, reviews, and other assurance engagements. It replaces the extant SQC 1 (Standard on Quality Control 1) — not SA 220, which is a separate, engagement-level standard covering the audit engagement partner's own responsibilities.
SQM1's system of quality management has eight components:
- The firm's risk assessment process — establish quality objectives, identify and assess quality risks, design responses
- Governance and leadership — the firm's culture, and the managing partner's accountability for the system
- Relevant ethical requirements — independence, confidentiality, the ICAI Code of Ethics
- Acceptance and continuance of client relationships and specific engagements
- Engagement performance — planning, direction, supervision, review, consultation, and engagement quality reviews
- Resources — human, technological, and intellectual resources the system depends on
- Information and communication — internal and external, supporting the rest of the system
- Monitoring and remediation — evaluating the system and fixing what's found not working
How SQM1 Differs from SQC 1
| Requirement | SQC 1 (current) | SQM1 (deferred) |
|---|---|---|
| Approach | Quality control — largely compliance-checklist | Quality management — risk-based |
| Quality objectives | Not structured as objectives | Eight explicit components, operating iteratively |
| Risk-based approach | Not required | Explicit — firms must identify and respond to quality risks |
| Monitoring | Periodic inspection | Ongoing risk assessment + monitoring and remediation |
| Engagement quality review | Governed separately | Same EQR scope, integrated into the firm-level system |
| Documentation | Engagement file | Firm-level system documentation, plus engagement file |
The key shift: SQC 1 was a fixed set of firm policies. SQM1 requires an operating, risk-responsive system — the firm has to identify its own quality risks rather than follow a generic checklist.
EQR Requirements Under SQM1
Engagement Quality Review (EQR) — required under SQM 2 at the firm-policy level and SA 220 (Revised) at the engagement level — applies to:
- Audits of listed entities (mandatory)
- Audits of public interest entities
- Engagements where the firm designates an EQR as required based on risk
The EQR process:
- The Engagement Quality 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
EQR Procedures
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EQR Review Procedures: NFRA-Defensible Documentation [2026] — What the EQR reviewer must do, what they must document
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EQR Guide: Engagement Quality Review for Indian Audit Firms — Implementation steps and SQM1 alignment
Templates and Downloads
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EQR Review Memo Template: Engagement Quality Review Under SQM 2 — Ready-to-use memo template covering all required sections
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SQM1 Quality Objectives Template: Firm-Level Quality Management — Document all eight components per ICAI requirements
Getting Ready Even Without a Fixed Deadline
ICAI's deferral removes the hard date, not the eventual requirement — SQC 1 stays in force in the meantime, and SQM1 will apply once a new date is announced. Firms that build the system now aren't racing a deadline; they're doing the work once instead of twice.
Assessment — document current quality control practices under SQC 1. Identify gaps against SQM1's eight components.
Design — develop firm-level quality management policies. Draft engagement quality review procedures. Create documentation templates.
Implementation — train partners and senior staff. Run a pilot engagement quality review on one significant engagement.
Testing — review the pilot's documentation. Identify gaps. Refine procedures.
Deployment — roll out to all significant engagements. Begin the ongoing monitoring and remediation process.
The Technology Question
SQM1's monitoring requirements — ongoing file reviews, engagement quality review 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 — review memo templates, quality-component 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/EQR workflow documentation as part of its full-stack audit platform — engagement quality review memo templates, quality-component 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.