Statement on Auditing Standards No. 146, Quality Management for an Engagement Conducted in Accordance With Generally Accepted Auditing Standards, was issued by the AICPA Auditing Standards Board in June 2022. It supersedes AU-C section 220, Quality Control for an Engagement Conducted in Accordance With GAAS, and it is the engagement-level half of the AICPA quality management package. The firm-level half is SQMS No. 1, A Firm's System of Quality Management, with SQMS No. 2 covering engagement quality reviews. If your firm has already built its system under SQMS 1, SAS 146 is the standard that tells the engagement partner what that system expects on each audit.
This page paraphrases the standard. Read SAS 146 in AICPA Professional Standards for the full text and application material.
When is SAS 146 effective?
SAS 146 is effective for engagements conducted in accordance with GAAS for periods beginning on or after December 15, 2025 (paragraph 10). The test is when the audit period begins, not when it ends.
| Entity year-end | Period begins | Under SAS 146? |
|---|---|---|
| December 31, 2025 | January 1, 2025 | No, AU-C 220 still applied |
| December 31, 2026 | January 1, 2026 | Yes |
| June 30, 2026 | July 1, 2025 | No |
| June 30, 2027 | July 1, 2026 | Yes |
One amendment runs on a different clock. SAS 146 amends AU-C 935, Compliance Audits, and that amendment is effective for compliance audits for fiscal periods ending on or after December 15, 2025. Firms doing single audits should check both dates against each client's fiscal year.
What is the objective?
The auditor's objective is to manage quality at the engagement level to obtain reasonable assurance that quality has been achieved, so that the auditor has fulfilled the auditor's responsibilities and conducted the audit in accordance with professional standards and applicable legal and regulatory requirements, and so that the report issued is appropriate in the circumstances.
The shift from AU-C 220 is in the verb. The engagement partner is no longer only implementing the firm's quality control procedures. The engagement partner takes overall responsibility for managing and achieving quality on the engagement.
What does the engagement partner have to do?
The requirements run from paragraph 13 to paragraph 41 and fall into eight blocks.
Leadership (paragraphs 13 to 15). The engagement partner takes overall responsibility for managing and achieving quality, including creating an environment that emphasizes the firm's culture and expected behavior. The partner must be sufficiently and appropriately involved throughout the audit to have a basis for concluding that significant judgments and conclusions are appropriate. The partner's actions should emphasize that every team member contributes to quality, the importance of ethics, open communication that lets staff raise concerns without fear of reprisal, and professional skepticism. Assigning tasks to others does not move the responsibility; the partner stays responsible through direction, supervision and review.
Ethics and independence (16 to 21). The partner understands the relevant ethical requirements, makes sure the team is aware of them and of the firm's policies, evaluates threats that come to attention, stays alert to breaches, and, before dating the report, determines whether relevant ethical requirements, including independence, have been fulfilled. See AU-C 200 and independence.
Acceptance and continuance (22 to 24). The partner determines that the firm's acceptance and continuance procedures were followed and that the conclusions are appropriate, uses that information in planning, and tells the firm promptly if the team learns something that would have caused the firm to decline.
Engagement resources (25 to 28). The partner determines that sufficient and appropriate resources are assigned in a timely manner, that the team collectively has the competence, capabilities and time, and that the resources are used appropriately. If resources are insufficient, the partner takes action, including asking for additional or different resources.
Direction, supervision and review (29 to 34). The nature, timing and extent of direction, supervision and review must be planned and performed in line with the firm's policies and professional standards and must respond to the engagement's circumstances. The partner reviews documentation at appropriate points, including significant matters and significant judgments, and on or before the report date determines that sufficient appropriate evidence supports the report. Before dating the report the partner reviews the financial statements and the report, including any key audit matters description, and reviews formal written communications to management, those charged with governance or regulators before they are issued.
Consultation (35). The partner takes responsibility for the team consulting on difficult or contentious matters and on matters the firm's policies require, and determines that the conclusions agreed with the party consulted were implemented.
Engagement quality review and differences of opinion (36 to 38). Where an engagement quality review is required, the partner determines that a reviewer has been appointed, cooperates, discusses significant matters and judgments with the reviewer, and does not release the report until the review is complete. Differences of opinion are resolved under the firm's policies, and the report is not dated until they are resolved. See engagement quality review.
Monitoring and overall responsibility (39 and 40). The partner obtains and considers information from the firm's monitoring and remediation process, and before dating the report determines that the partner's involvement was sufficient and appropriate throughout.
What must be documented?
Paragraph 41 adds to AU-C 230. The file must include significant issues identified, relevant discussions and conclusions on ethics and independence and on acceptance and continuance; the nature, scope and conclusions of consultations and how they were implemented; and, where an engagement quality review is required, that it was completed before the report was released.
How does it change a small firm's audit file?
An illustrative case: a four-partner firm audits 30 clients, and each engagement partner currently signs a one-line "partner review complete" box. Under SAS 146 that box does not show involvement throughout the audit. A file that supports paragraph 40 usually carries dated evidence that the partner reviewed the risk assessment, the significant judgments, and the draft report, plus the independence conclusion made before the report date. The firm's own policies set how much; SAS 146 sets that the partner's involvement is evidenced.
Practice observations, not requirements of the standard:
- A review sign-off dated on report day, with no earlier partner touchpoints, is hard to square with "sufficiently and appropriately involved throughout"
- Independence confirmations collected at planning and never refreshed before the report date
- Consultation conducted verbally with no record of the conclusion or its implementation
- Engagement quality review required by firm policy but completed after the report was released
- Resourcing decisions made at the firm level with nothing in the file showing the partner judged the team's competence and time
Frequently asked questions
Does SAS 146 apply to reviews and compilations?
SAS 146 applies to audits under GAAS. Reviews and compilations follow SSARS No. 26, and attestation engagements follow SSAE No. 23, all with the same December 15, 2025 effective date for periods beginning on or after it. See SSARS 25 and 26.
Is SAS 146 the same as SQMS 1?
No. SQMS 1 is the firm's system of quality management. SAS 146 is the engagement partner's responsibilities within an audit and relies on the firm's system. Firm policies and SAS 146 requirements have to line up. See the SQMS 1 guide.
Who needs an engagement quality review?
SAS 146 applies the requirement where an engagement quality review is required under the firm's policies or procedures, which SQMS 1 and SQMS 2 drive from criteria the firm sets. SAS 146 does not itself list engagements that need one.
Does the engagement partner have to personally do the review work?
No. Paragraph 15 lets the partner assign procedures or tasks to others on the team, but the partner remains responsible through direction, supervision and review of that work.
Sources
- AICPA Auditing Standards Board, SAS No. 146, Quality Management for an Engagement Conducted in Accordance With GAAS (June 2022), paragraphs 10 to 41 and the amendment to AU-C 935
- AICPA Professional Standards, AU-C 220 (superseded), AU-C 230, SQMS No. 1 and SQMS No. 2
- AICPA, quality management standards resources: aicpa-cima.com
Related
- AU-C 220 engagement quality control
- AU-C 230 audit documentation
- SQMS 1 quality management guide
- Engagement quality review checklist
- Engagement quality review guide
- SAS 151 fraud
CORAA prepares ready-to-review audit files for US CPA firms from QuickBooks books; you review and sign. See /us.
Part of CORAA University · SEC reporting and PCAOB audits: related guides, calculators and templates.
AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error