What it is
SQMS No. 1 requires a firm to monitor its system of quality management and remediate deficiencies. For many small firms this is the hardest component: choosing which engagements to inspect, deciding what is a deficiency, and finding the root cause rather than fixing one file.
This checklist walks the monitoring and remediation process from design through reporting to the individual with ultimate responsibility. Firms had to design and implement their system by December 15, 2025, with the first evaluation within one year after. Not an AICPA product.
When to use it
- When setting up the firm’s monitoring plan.
- At each monitoring cycle, to confirm the work is complete before the annual evaluation.
- To evidence monitoring for peer review.
What’s inside
- Design of the monitoring process and engagement inspection plan
- Performance of monitoring activities
- Findings, deficiency evaluation and root cause
- Remedial actions with owner, date and effectiveness test
- Communication and record keeping
- Summary by section
Standard cited
This template follows SQMS No. 1. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
How many engagements must we inspect?
SQMS No. 1 requires the firm to include inspection of completed engagements and to select at least one completed engagement for each engagement partner on a cyclical basis the firm determines. The standard does not set the length of the cycle. Its application material gives examples such as three years for engagement partners who perform audits and five years for others.
What is a root cause analysis for a small firm?
It asks why a finding happened (training, process, tools, supervision, resources), and whether it is isolated or recurring. Depth should match the severity and pervasiveness of the deficiency.
Who can perform monitoring?
People with the competence, capabilities and time to do it. The standard’s premise is that objectivity is enhanced when engagement team members and the engagement quality reviewer are not involved in monitoring that engagement.
Related templates
- Peer Review Readiness Checklist
- Engagement Quality Review Checklist (SQMS 2)
- SQMS No. 1 Annual Evaluation Checklist
- Review Checklist for AI-Assisted Work
Last updated 11/05/2026. All free templates.