Audits of Less Complex Entities (LCEs)
There has been growing concern about the length, scalability, and understandability of the International Standards on Auditing (ISAs), and their application to audits of Less Complex Entities (LCEs), including whether they can be applied in a cost-effective manner to all audits.
Some countries have taken actions in their jurisdictions to address these challenges by following different approaches (e.g. by issuing a national standard for LCEs). However, alternative standards in different jurisdictions may lead to inconsistencies in quality and cause confusion for users of audit reports.
Subsequent to consultation with its stakeholders, the International Auditing and Assurance Standards Board (IAASB) decided that, amongst other measures (such as digitisation of standards), a separate, standalone standard, designed to be proportionate to the typical nature and circumstances of an audit of the financial statements of an LCE could help LCEs and their auditors.
This proposed standard is intended to serve the public interest by:
- Maintaining confidence in financial reporting of LCEs.
- Assisting auditors of LCEs undertake consistent, effective, and high-quality audits.
- Being responsive to stakeholder needs.
- Promoting a more consistent application of the auditing standards to audits of LCEs.
The proposed standard is intended to provide reasonable assurance in the circumstances of an audit of the financial statements of an LCE. The new stand-alone standard for audits of less complex entities:
- Is designed specifically for audits of a less complex entities
- Is based on the underlying concepts from International Standards on Auditing
- Was developed to be understandable, clear and concise
- Reduces the risk of jurisdictional divergence by driving consistency and comparability globally
- Will achieve a quality audit engagement
The IAASB has now exposed this proposed standard for comment, and we have issued the consultation documents on this page for our stakeholders.