IAASB releases discussion paper on the audits of less complex entities

Released 29 April 2019

The IAASB has released the discussion paper to further understand the challenges faced by auditors using ISAs in the audits of less complex entities.

The IAASB released the discussion paper Audits of Less Complex Entities: Exploring Possible Options to Address the Challenges in Applying the International Standards on Auditing (ISAs) on 29th April 2019, in an effort to understand better the challenges of using ISAs in less complex entities (LCEs).

There has long been discussion over the efficacy of the ISA when applied to less complex entities, and the IAASB recognises that there is a ‘global call for action to address issues in complexity, length, understandability, scalability and proportionality…’.

The discussion paper recognises the challenges that are faced by auditors of less complex entities, and suggests a number of possible actions in Section III, to address these challenges including:

revising the ISAs to make the auditor’s work effort clearer by focussing more on what the auditor needs to do, adopting an approach of setting out the basic requirements, and then adding further requirements for more complex entities, and better signposting within application material how to apply the requirements to relevant audits;

developing a separate auditing standard of audits of LCEs, either through adation of the current ISAs or creating a new standard based on a different framework. The idea of developing a new auditing standard has already been pursued by some jurisdictions (Nordic Federation, Institute of Chartered Accountants in Sri Lanka and in Belgium) ; and

developing guidance for auditors of LCEs or other related actions, either through a comprehensive guide, International Auditing Practice Notes or guidance on specific areas.

The discussion paper asks 5 questions of respondents, and will be open until 12th September 2019.

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