Building a tax quality management system: Applying ISQM1 in a combined service practice

In the Netherlands and many other countries these practices are often combined with tax services. What does ISQM1 mean for a combined or stand-alone tax practice?

From quality control to quality management

ISQM1 applies to firms performing audits, reviews, and related assurance services. Its main goals are to:

1. Strengthen quality systems;
2. Ensure compliance with professional and legal standards; and
3. Foster a culture of quality, ethics, and professional scepticism.

The key shift is from after-the-fact quality control to continuous quality management.

ISQM1 in a nutshell

The ISQM1 framework consists of eight core components: 

• Risk assessment process;
• Governance and leadership;
• Ethical requirements;
• Client acceptance and continuance;
• Engagement performance;
• Information and communication;
• Monitoring and remediation; and 
• Risk assessment. 

These elements interact and together form a dynamic, ongoing cycle of quality assurance.

Steps toward an ISQM1-compliant practice

ISQM1 follows the plan-do-check-act cycle. First, identify which elements are already in place (plan), assess risks and define control measures (plan), implement them in practice (do), evaluate performance (check), and take corrective action (act). This continuous loop embeds quality and compliance into daily operations.

Tax services under ISQM1

For stand-alone tax practices, ISQM1 is not mandatory. However, in a combined organisation, there is usually one QMS for the entire entity, meaning the tax practice often falls within its scope. Appointing a dedicated compliance or quality officer for tax can ensure that specific laws, regulations, and professional requirements for tax services are properly addressed.

Challenges and opportunities

Applying audit-based rules to tax services can feel like fitting a square peg into a round hole. Yet ISQM1 offers tangible benefits. By involving tax professionals in the ISQM1 project team, firms can determine which requirements apply to the organisation as a whole and which are specific to tax.

The project team operates within three pillars: the overall QMS, professional regulations, and the unique quality elements of the tax practice. Active participation of tax professionals enhances both alignment and commitment across teams.

Conclusion

ISQM1 is clearly relevant for tax functions within combined audit firms, and even stand-alone tax practices can benefit from adopting its principles. Applying ISQM1 fosters risk-based thinking, ethical governance, sound client-acceptance procedures, and continuous improvement.

Even without formal obligation, tax professionals can “cherry-pick” ISQM1 elements that strengthen their own practice, embedding quality as a core part of professional integrity.

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In addition to her role as an international tax specialist, Linda Schuurmans is the compliance manager for the tax practice at Schipper Accountants. In that role, Linda is responsible for the quality management system and compliance for the tax practice at Schipper Accountants.