APES 320 Quality Management for accounting firms explained

What is APES 320?

APES 320 *Quality Management for Firms that provide Non-Assurance Services* is the professional standard that requires Australian accounting firms to establish and maintain a system of quality management over their non-assurance work — services such as tax, bookkeeping, advisory, compilation and other public-practice engagements.

It is issued by the Accounting Professional and Ethical Standards Board (APESB) and applies to firms of members of CPA Australia, Chartered Accountants Australia and New Zealand (CA ANZ) and the Institute of Public Accountants (IPA) who are in public practice. The current version was reissued in February 2022 and replaces APES 320 *Quality Control for Firms* (September 2019). Firms were required to incorporate the amendments into their systems by 1 January 2023.

The reissued standard keeps the requirements of the international quality control standard ISQC 1 that are not specific to assurance practices, and its elements are aligned at a high level with the components of the international quality management standard ISQM 1. It is built around policies and procedures that the firm documents, communicates to its people and monitors.

Who APES 320 applies to

APES 320 sets the standards for members in public practice to establish and maintain a system of quality management in their firms. In practice this captures:

• Sole practitioners and small public-practice firms providing tax, accounting and advisory services.
• Mid-tier and large multidisciplinary firms, for the non-assurance parts of their business.
• Networks and firms operating across multiple offices.

The standard is scalable. It says policies and procedures "need not be complex or time-consuming to be effective", that documentation for smaller firms "may be less formal and extensive than for larger Firms", and that in a small firm one person may need to perform more than one quality management role.

Note the scope: APES 320 covers non-assurance services. Audit, review and other assurance practices are covered by the AUASB's quality management standards (ASQM 1, ASQM 2 and ASA 220). Appendix 2 of APES 320 compares its elements with the ASQM 1 components for firms that do both kinds of work.

The system of quality management

APES 320 requires a firm to establish and maintain a system of quality management that includes policies and procedures addressing each required element (para 3.5). The firm must document those policies and procedures and communicate them to its personnel (para 3.6), and keep documentation that evidences how each element operates (para 3.17).

Responsibility sits at the top. The firm's chief executive or managing partner (or equivalent), or the managing board of partners, must assume ultimate responsibility for the system, and the firm must document this (para 3.13). People given operational responsibility for the system must have appropriate experience, ability and authority.

Unlike ISQM 1, APES 320 does not contain a separate "risk assessment process" element. A firm that also has an assurance practice must meet ASQM 1's risk-based requirements for that practice.

The elements you must address

Paragraph 3.5 lists seven elements:

• Governance and leadership — policies and procedures that promote an internal culture recognising that quality is essential.
• Professional standards — compliance with the APESB standards and the ethical requirements in APES 110, including independence where relevant.
• Acceptance and continuance of client relationships and specific engagements.
• Resources — human, technological and intellectual resources, including the use of service providers.
• Engagement performance — how work is planned, supervised, reviewed, consulted on and concluded.
• Information and communication — capturing and exchanging quality-relevant information.
• Monitoring and remediation — evaluating the system and correcting deficiencies.

These elements are not silos. Information and communication, for example, feeds monitoring; governance and leadership shape every other element.

Timing, monitoring and remediation

The reissued APES 320 has applied since 1 January 2023, so it is business-as-usual rather than a transition project. The monitoring requirement is the one most often under-resourced:

• A monitoring process. The firm must establish a monitoring process designed to give it reasonable confidence that its quality management policies and procedures are relevant, adequate and operating effectively (para 4.65).
• Cyclical inspections. That process must include ongoing consideration and evaluation of the system and, on a cyclical basis, inspection of at least one completed engagement for each engagement partner. People who performed an engagement must not inspect it.
• Deficiencies. Monitoring documentation should identify the deficiencies noted, evaluate their effect and record the basis for deciding what further action is needed.

Simply noting a deficiency is not enough; the firm should act on it and check the fix worked. When quoting a specific paragraph in firm policies, check the current wording against the standard on the APESB website.

How APES 320 relates to APES 110

APES 320 does not stand alone. It sits within the APESB framework alongside the APES 110 Code of Ethics, which sets the fundamental ethical principles — integrity, objectivity, professional competence and due care, confidentiality and professional behaviour — plus the independence requirements.

The relationship is direct:

• One element of the APES 320 system is professional standards, so the firm's policies and procedures must be designed to support compliance with APES 110 and the other APESB standards.
• Breaches of ethics or independence are exactly the kind of issue the APES 320 monitoring process is meant to detect and remediate.

In short, APES 110 tells you *what* the ethical obligations are; APES 320 makes you build a firm-wide system to ensure those obligations — and quality more broadly — are consistently met. Both are relevant to anyone working in the tax practitioners space.

What firms should do now (and common pitfalls)

A practical baseline for an in-scope firm:

• Confirm scope. Identify which services are non-assurance (APES 320) and which, if any, are assurance (ASQM regime).
• Assign responsibility. Document who holds *ultimate* responsibility for the system and who holds *operational* responsibility.
• Document each element. Record the policies and procedures for all seven elements and how they are communicated to staff.
• Schedule inspections. Plan the monitoring cycle so every engagement partner has at least one completed engagement inspected.
• Tie in APES 110. Make sure independence and ethics are built into the professional standards element, not treated as a separate exercise.
• Use professional-body tools as a start, not an end. Templates help, but tailor them to how your firm actually works.

The most common failures are predictable:

• Treating it as a manual, not a system. Buying a template and shelving it does not show the policies are operating.
• Copy-paste policies that do not reflect your clients, services or technology.
• "Set and forget". Skipping the monitoring cycle or failing to act on inspection findings.
• Logging deficiencies without fixing them, so the same issue recurs.
• Assuming you're too small. Scalability reduces the burden — it does not remove the obligation. Sole practitioners are in scope.