In the wake of the Information and Technological (ICT), Revolution and consequent higher Quality benchmarks and measurements, The Institute of Chartered Accountants of India (ICAI) has added a new concept of ‘Audit Quality Maturity Models’ in its learning module. The Audit Quality Maturity Model helps audit firms determine their current state of audit maturity. The degree of a company’s maturity in this model is determined by the span of scores. Post acknowledging the response of the members to the exposure draft, the council of the ICAI has not approved the second version of AQMM. Read to learn the AQMM v 2.0 in detail.
The Audit Quality Maturity Model version 2.0 (AQMM v 2.0) has been launched by the Institute of Chartered Accountants of India (ICAI) following the obligatory execution of version 1.0 from April 1, 2023. AQMM v 2.0 applies to the firms auditing the listed entities, banks (excluding cooperative banks, except multi-state ones), and insurance companies, excluding those conducting only branch audits.
The model considers firms across three areas: Practice Management – Assurance, Human Resource Management, and Digital Competency, with a total score of 600. Firms are mandated to get a minimum of 30% in each section to authorize a maturity level, ranging from Level 1 (30-50%) to Level 4 (85-100%). AQMM v 2.0 shall apply to the firms submitting their peer review applications on or after April 1, 2025, encircling a review period from April 1, 2022, to March 31, 2025. The firms can choose to take on the AQMM v 2.0 earlier, streamlining an easier transition from the previous version. The model is part of the measure of the ICAI to improve audit quality across the profession, ensuring that firms maintain high norms in practice management, resource management, and digital skills.
The Audit Quality Maturity Model (AQMM v 1.0) is a comprehensive evaluation model designed to help audit firms assess their current level of audit maturity and determine areas where competencies need to be maintained.
The AQMM v 1.0 is mandatory with effect from April 1, 2023, to the firms auditing the following entities:
- A Listed Entity
- Banks other than Co-Operative banks (Except multi-state Co-operative banks)
- Insurance Companies
However, no coverage of the firms is there that conduct only branch audits.
The firms that do merely the branch audits are not covered. The firm-level received via AQMM v 1.0 is analysed via a peer reviewer and recorded on the website of the ICAI against the validity of the firms peer review certificate. No revision is there for the applicability of AQMM v 2.0. Hence, AQMM v 2.0 is obligatory for the firms auditing the above-said entities.
The firm-level received via AQMM v 1.0 is being analyzed via a peer reviewer and recorded on the ICAI website against the validity of the firms peer review certificate.
The centre for the audit quality offers to draw the version 2.0 of the Audit Quality Maturity Model. It was regarded by the council at its 432nd meeting and from the previous decisions it is being issued for public comments.
In the following links, the exposure draft and the pertinent files can be accessed-
- AQMM v 2.0 https://rb.gy/4gpnvs
- A presentation summarizing the proposed changes https://rb.gy/qksppp
- Comparison of AQMM v 1.0 and AQMM v 2.0 https://rb.gy/l23c0o
The comments on the aforesaid Exposure Draft may be sent at the following link https://forms.gle/4iWG8oHzgBERRTPi8 by 2nd August 2024.
Transitional Provisions:
Compared to the older version AQMM v 2.0 to have the smooth transition will apply to the firms (referred to as Practice Units in the context of Peer Review) which submit Form 1 – Application cum Questionnaire on or after 01.04.2025. It conceals firms for which the review duration is from 01.04.2022 till 31.03.2025 (other than firms that have been formed during this period for which the review period begins from the constitution date till 31.03.2025). The Practice Units can adopt AQMM v 2.0 before.
AQMM v 2.0 – Sections and Scores
AQMM v 2.0 comprises the following three sections:
(a) Practice Management –Assurance
(b) Human Resource Management
(c) Digital Competency
The Scoring Pattern under the Three Sections is Stated as
It is required for a firm to score a minimum of 30% as per each section to qualify for attaining the assigned level. If the firm attains the eligibility described above criteria, it will evaluate the percentage of score obtained based on the Actual Score divided by the Maximum Score (i.e. 600) multiplied by 100. The firm maturity level shall be determined based on this percentage of the score computed.
You can download version 2.0 of the Audit Quality Maturity Model here: https://resource.cdn.icai.org/81585caq65805.pdf
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