IAASB has issued a Discussion Paper (DP) Audits of Less Complex Entities: Exploring Possible Options to Address the Challenges in Applying the ISAs in which it is seeking views on the possibility of developing a separate auditing standard for less complex entities (LCEs).
ICAEW put together a working group to respond, comprised mainly of SMPs. There have been some interesting shifts of position throughout our discussions; some of those calling for a new standard are now not so sure, and some who have always believed in a single set of auditing standards wonder whether standards can continue to serve both ends of the market.
In the UK audit exemption limits are high compared to jurisdictions with many more smaller audits. However, if IAASB takes no action of substance, some jurisdictions may develop their own standard for smaller audits. This has already begun, and ICAEW believes that this is a real threat to the consensus IAASB has been building over 40 years.
Ideally IAASB would redraft all ISAs on a principles-based, building blocks think-small-first type basis, but ICAEW does not believe that IAASB has the will or resources, and so exploring a new standard for the audit of LCEs is the next best thing.
Many technical and practical issues remain. In particular who would have final say on what constitutes an LCE. If a new standard is developed, local audit regulators might consider adding quantitative criteria to the qualitative criteria described by IAASB, and restrict the application of the standard to the audit of LCEs that are smaller in numerical terms, or in terms of ownership. We also note a distinction between less complex entities and less complex audits, issues with group audits, and issues for software and methodology providers, as well as entities more complex than originally thought. Nevertheless, we suggest that lack of clarity in these areas, including around scoping, should not prevent an initial exploration.
We acknowledge that some practitioners do not experience difficulties in applying ISAs to the audit of LCEs. IAASB may receive divided views in response to this DP. To progress this project effectively, through additional guidance or a new standard, it will need a well-motivated champion to lead it.
The deadline for comments on the consultation is 12 September. Anyone can respond - ICAEW's draft response is here and comments on that would be appreciated by Friday 23 August at the latest and can be sent to email@example.com.
Having read your article I noticed that something is missing. For this reason I present to professional guides https://gearexpertguides.com/ which will help everyone.