ICAI postpones implementation of SQM 1 & SQM 2: SQC 1 remains in effect until further notice
The existing quality control standard, SQC 1, will continue to apply to all audit and assurance firms.
The Institute of Chartered Accountants of India (ICAI) has announced the deferment of the mandatory effective date of two new Standards on Quality Management (SQM 1 and SQM 2).The decision was taken at the 451st meeting of the Council of ICAI held on March 30-31, 2026.
Until further notice, the existing Standard on Quality Control (SQC 1) will continue to govern audit and assurance practices across firms.
SQC 1, titled “Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements”, was first issued in October 2007 and became effective for engagements beginning on or after April 1, 2009.
It has since provided the framework for quality control procedures in firms undertaking audits, reviews, and related services.
In October 2024, ICAI introduced two new quality management standards aimed at strengthening the risk‑based approach to audit quality.
1.SQM 1, “Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements”,
2.SQM 2, “Engagement Quality Reviews”
These two quality management standards were scheduled to become mandatorily effective from April 1, 2026.These standards were designed to replace SQC 1 and align Indian practice more closely with international developments in quality management.
So mainly after deliberation, the Council of ICAI has decided to defer their implementation.The announcement clarifies that until a new effective date is notified, SQC 1 will remain applicable to all firms.
By postponing the mandatory application, ICAI has allowed firms to continue under the familiar SQC 1 regime while awaiting further guidance. The announcement also underscores ICAI’s commitment to balancing regulatory advancement with practical readiness among stakeholders.
This decision, issued under the authority of the Council of ICAI, will be closely watched by the profession, as the eventual rollout of SQM 1 and SQM 2 is expected to reshape quality management standards in India’s audit and assurance.
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