QC 1000: Definition of Firm Personnel
We recently had the pleasure of attending, sponsoring, and speaking at the 2025 AICPA LEAD Conference. Vicky and I facilitated a breakout session titled Quality Management Standards (QC 1000 / SQMS 1): What L&D Leaders Need to Know. However, what I didn’t know was that I would learn something, something that I believe has been overlooked by CPAs currently involved in implementing the new quality management standards. Specifically, the expanded scope of who qualifies as firm personnel in accordance with the definition within QC 1000.
Who qualifies as firm personnel?
Our session was scheduled for 8:00 am on Day 2 of the conference. We’d been warned that our topic might not resonate with the audience (L&D professionals) because they weren’t CPAs and that perhaps we should pick a different topic. I ignored their suggestion and went with my gut. “Damn the torpedoes, full steam ahead!”
At 7:57am there were only a handful of people in the room. “Oh know,” I thought. “Were the naysayers, right?” Luckily, at that exact moment of my self-doubt, the room started filling up. By the time we were introduced, we had a packed room!
During the Q&A part of the session, a woman, who I later found out was a learning and compliance leader at a Global Network Firm, asked, on the surface, to be an easy question: “Who qualifies as firm personnel under QC 1000?”
I thought she was asking about the distinction between “firm personnel” and “other participants” within QC 1000 and gave her examples of each. However, I could tell by her body language that I really didn’t answer her question. She already knew that. She was asking me something deeper, something that she and her firm had been contemplating. That is, that more people qualify as “firm personnel” than meets the eye.
Remember, I’m sitting in a room filled with L&D professionals at accounting firms. So, it got us all thinking: “What about L&D professionals? Would they be considered firm personnel?”
Definition of firm personnel
According to QC 1000, firm personnel are individual proprietors, partners, shareholders, members or other principals, accountants, and professional staff of a registered public accounting firm whose responsibilities include assisting with:
- The performance of the firm’s engagements; or
- The design, implementation, or operation of the firm’s QC system, including engagement quality reviews.
Professional staff include employees as well as individuals, such as non-employee contractors and consultants, who work under the firm’s supervision or direction and control and function as the firm’s employees. These individuals include, for example, secondees and leased staff who work under the supervision or direction and control of the firm. Professional staff does not include persons engaged only in clerical or ministerial tasks.
Admittedly, I had to look up the meaning of “ministerial.” According to Cornell Law, a ministerial act is an act performed in a prescribed manner and in obedience to a legal authority, without regard to own’s own judgment or discretion.
Examples of firm personnel
Within the PCAOB’s Staff Guidance – Insights for Firms, there is a diagram that gives examples of both firm personal and other participants.
In addition to the obvious (i.e., audit professionals on engagement teams), examples of firm personnel include:
- EQR residing inside the firm
- Personnel at shared service centers that are part of the firm
- Secondees and leased staff
- Specialists employed by the firm
Before we get into whether L&D professionals would be considered firm personnel, let’s discuss why it matters.
Why does it matter?
QC 1000 sets out several requirements related to firm personnel.
Mandatory training requirements
As we discuss in this post, QC 1000 sets out certain mandatory training requirements for firm personnel 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.
I would think, at a minimum, this means that all firm personnel should receive training the requirements of QC 1000!
In addition to these mandatory training requirements, QC 1000 sets out other requirements for firm personnel (this list is certainly not all inclusive):
Due professional care
All firm personnel and other participants involved in the design, implementation, and operation of the QC system must exercise due professional care in all matters related to the QC system. Due professional care means acting with reasonable care and diligence, exercising professional skepticism, acting with integrity, and complying with applicable professional and legal requirements (APLR).
Policies and procedures
Paragraph .29 states the firm should design, implement, and maintain policies and procedures for addressing potential noncompliance with APLR and with the firm’s policies and procedures with respect to the QC system, the firm’s engagements, firm personnel, and other participants. This would include things like ethics and independence requirements. Such policies and procedures should be made available to all firm personnel and other participants.
Ethics and independence
Paragraph .31 requires that firm personnel must understand and comply with ethics and independence requirements. Furthermore, conditions, events, relationships, or activities that could constitute violations of ethics and independence requirements are properly identified, evaluated, and responded to by the firm and firm personnel on a timely basis. Obviously, to properly identify possible violations, the firm would need to institute a proper monitoring system.
Paragraph .34(e) requires that the firm obtain certifications from firm personnel regarding familiarity and compliance with SEC and PCAOB independence requirements, applicable ethics requirements, and the firm’s independence and ethics policies and procedures upon employment and at least annually thereafter.
Resources
Several requirements related to firm personnel are set out in the quality objectives for the resources component in paragraph .44 including:
- Firm personnel are hired, developed, and retained who have the competence to perform activities and carry out responsibilities for the operation of the firm’s QC system and the performance of the firm’s engagements.
- Firm personnel demonstrate a commitment to quality through their actions and behaviors and development and maintenance (i.e., training) of the competence to perform their roles.
- Firm personnel have the competence, objectivity, and time needed to fulfill their responsibilities.
- Firm personnel comply with the firm’s policies and procedures related to the operation of the firm’s QC system and the performance of engagements.
- Firm personnel are evaluated at least annually, incentivized to fulfill their responsibilities and adhere to appropriate standards of conduct, and held accountable for their actions and failures to act.
Paragraph .47 states the firm should design, implement, and maintain policies and procedures for the engagement partner and, commensurate with their responsibilities, other firm personnel participating in an engagement to obtain and maintain the competence to fulfill their respective engagement roles.
Paragraph .50 states the firm should design, implement, and maintain policies and procedures regarding licensure.
There are other requirements for firm personnel in QC 1000 within the other components too, but we didn’t have the time to get into them in this post.
So, now that we know why it matters if someone is classified as “firm personnel,” let’s get to the question at hand which is “Are L&D professionals considered firm personnel?”
L&D professionals are firm personnel under QC 1000
As discussed in this post, one of the primary quality responses implemented by firms in their QC system is training. L&D professionals are responsible for designing and implementing training within their firms. And, according to QC 1000, firm personnel include professional staff with responsibilities related to the “…operation of the firm’s QC system.” Therefore, L&D professionals would be considered firm personnel in the context of QC 1000.
I think paragraph .33(b) makes it clear that L&D professionals ARE firm personnel. It states:
Obligations of firm personnel to perform with integrity and objectivity all activities associated with the operation of the QC system and the performance of engagements (such as training and other professional development activities; engagement planning, performance, and supervision; and communication with companies for which the firm performs engagements, other firm personnel, and regulators).
Closing thoughts
Later at the conference I ran into the woman again and told her the findings that I’ve outlined above. I asked her if she agreed with my summation, and she said she did. I thanked her for attending the session and for the inspiration for this post!
Both the conference and our session were a success. Many people came up to us afterwards asking if we were going to do it again. Well, you’re in luck! Check out our free, CPE-eligible webinar Quality Management Standards (SQMS 1 and QC 1000): What L&D Leaders Need to Know.
As we mention in the webinar (and given the expanded definition of “firm personnel” we discussed in this post), we believe that EVERYONE in your firm should gain an understanding of the requirements of the new quality management standards. A good way to start would be to enroll in one of these online courses:
- Overview of QC 1000: A Firm’s System of Quality Control
- Overview of SQMS 1: A Firm’s System of Quality Management (SOQM)
And be sure to reach out to us directly for group discounts!
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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.
