Audit Firm Training Requirements in QC 1000
In this post, I likened a quality control (QC) system for audit firms to internal controls over financial reporting (ICFR) for public companies. The quality objectives are what you want to happen, sort of like the 17 principles in the COSO Framework. The quality risks are like what could go wrongs (WCGWs) and the quality responses are the controls. And one of the biggest “controls” audit firms have within their QC system is training! This post explores why training is so important and the firm training requirements found within QC 1000.
Components of a QC system
QC 1000, A Firm’s System of Quality Control is effective for PCAOB-registered firms on December 15, 2025. The diagram above, found on page 41 of the PCAOB’s Adopting Release, illustrates the structure of the firm’s QC system under QC 1000. As we discussed in this post, it all starts with the firm’s risk assessment process, the first component of a firm’s QC system. The next six components, shown in the center of the diagram, are where firms are required to:
- Establish quality objectives
- Identify and assess quality risks
- Design and implement quality responses
As noted above, training is a one of the quality responses, or controls, implemented by firms.
The last component is the monitoring and remediation process, and it informs the risk assessment process through a feedback loop so, hopefully, firms are continually improving. And, when firms mess up, training is usually one of the remediation steps they incorporate.
How important is training to QC system?
It is essential! Training is an integral part of the new quality management standards impacting nearly every component. A “Control F” search for the word “training” within the PCAOB’s Staff Guidance – Insights for Firms regarding QC 1000 yielded 37 results.
For illustrative purposes, we’ve separate “training” into three different buckets (and will use the ethics and independence component to highlight each):
Preemptive training
Otherwise known as proactive training, this type of training (hopefully) prevents mistakes before they happen. Many of the quality responses within a QC system designed and implemented by firms will be preemptive training.
For example, your professionals need to be trained on the independence requirements of the AICPA, PCAOB and SEC to (hopefully) stay in compliance with such requirements.
Just-in-time training
Most training at audit firms takes place outside of busy season. This makes sense because that’s when your professionals have time. However, will they remember what they learned in the summer, six months later, when they are on engagements? That’s the $64,000 question!
Otherwise known as “real-time” or “on-the-job” training, this type of training provides your professionals with a resource at their moment of need. No wonder this type of training is a big part of the resources component as we discuss below.
For example, let’s say a professional is contemplating a person transaction and wonders if it runs afoul of independence requirements. They might be able to pull up a short, focused training that would help them answer their question.
Remedial training
Remedial training is reactive. This type of training usually gets mandated, either by the firm or a regulator, when a professional (or the firm) screws up so the mistake is not repeated. As noted above, this type of training would be included within the monitoring and remediation process component.
For example, say a firm gets in trouble with the PCAOB for providing non-allowable services to an audit client. The PCAOB might mandate remedial training on the allowable and prohibited services that audit firms can provide their clients.
Mandatory training requirements within QC 1000
Audit firms are required to provide mandatory training within the following components:
Ethics and independence component
One of the specified quality responses set out in the ethics and independence component is mandatory training. Paragraph .36 states:
A firm must provide mandatory training to firm personnel near the time of initial employment and periodically (at least annually) thereafter that addresses ethics and independence requirements and the firm’s ethics and independence policies and procedures.
Resources component
The other mandatory training requirement within QC 1000 is contained within the specified quality responses for the resources component. Paragraph .48 states:
In addition to the training required under paragraph .36, at least annually, the firm should provide mandatory training, including training on applicable professional and legal requirements, to firm personnel to develop and maintain their competence and enable them to fulfill their assigned QC and engagement roles in accordance with applicable professional and legal requirements and the firm’s policies and procedures.
We define “applicable professional and legal requirements” (APLR) in this post.
Additional PCAOB guidance on paragraph 48
The PCAOB’s Staff Guidance – Insights for Firms provides further insight into the mandatory training required by paragraph .48:
This specified quality response provides firms the ability to determine the type and extent of training necessary based on their personnel and the nature and circumstances of the firm and its engagements. For example, a firm may determine that training is necessary on a wide array of topics for a certain level of staff within the firm. Another firm may determine that training is necessary for one or more staff in a certain area due to a new engagement or need an area of development identified as part of a performance evaluation. A firm may also decide that it is necessary to repeat training as a periodic reminder of existing requirements, such as those relating to internal control over financial reporting.
Ultimately, the type and extent of training needs to be directed at whatever is necessary to enable firm personnel to fulfill their assigned QC and engagement roles in accordance with APLR and the firm’s policies and procedures. When designing their training programs and requirements, in addition to this specified quality response over providing mandatory training, firms may want to consider whether additional training should be mandated as part of the firm’s policies and procedures to address other topics in QC 1000. For example, in implementing policies and procedures regarding licensure, a firm may implement a training program that helps personnel comply with educational requirements for their licenses to remain valid. A firm could also consider recent engagement deficiencies and other QC deficiencies it has experienced when planning its training programs.
One example of “additional” training that firms might consider is providing their professionals with industry-specific training in specialized industries such as banking, insurance, and investment management. Explore how we helped with industry-specific training for a Big 4 member firm here and a regional firm here.
What about the mandatory training requirements within the SEC Practice Section?
The SEC Practice Section (SECPS) of the PCAOB, specifically Section 1000.08(d) – Continuing Professional Education of Audit Firm Personnel, sets out certain minimum requirements for continuing professional education (CPE).
However, as noted on the page, this was an interim quality control standard and will be rescinded on December 15, 2025, and replaced within QC 1000, A Firm’s System of Quality Control.
Closing thoughts
As noted above, QC 1000 does not impose specific requirements over firms’ training programs. We’ve worked with audit firms, big and small, to help them tailor a training program to their specific circumstances and needs. And we can help you too!
Speaking of training, it is our belief that the first step to effectively implementing QC 1000 (or SQMS 1) within your firm is to get all personnel up to speed on the requirements. And we’ve got the perfect solution! Check out our latest courses to help kick start your implementation efforts:
- Overview of QC 1000: A Firm’s System of Quality Control
- Overview of SQMS 1: A Firm’s System of Quality Management (SOQM)
Reach out to us directly for group discounts or if you need help closing the gaps within your existing training plan. We’re always happy to help!
About GAAP Dynamics
We’re a DIFFERENT type of accounting training firm. We view training as an opportunity to empower professionals to make informed decisions at the right time. Whether it’s U.S. GAAP, IFRS, or audit training, we’ve trained thousands of professionals since 2001, including at some of the world’s largest firms. Our promise: Accurate, relevant, engaging, and fun training. Want to know how GAAP Dynamics can help you? Let’s talk!
Disclaimer
This post is for informational purposes only and should not be relied upon as official accounting guidance. While we’ve ensured accuracy as of the publishing date, standards evolve. Please consult a professional for specific advice.
