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Technical resources

Less Complex Entities (LCEs) 
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Less complex entities (LCEs) make crucial contributions to the world economy and account for the great majority of entities globally. At the same time, increasingly complex structures and transactions need to be addressed in the International Standards on Auditing (ISAs). This complexity in the ISAs can pose challenges for audits of less complex entities.

Based on the feedback from a discussion paper and outreach, the International Auditing and Assurance Standards Board (IAASB) has developed an Exposure Draft named Proposed International Standard on Auditing of Financial Statements of Less Complex Entities (ED ISA for LCE) that is proportionate to the typical nature and circumstance of an audit of a less complex entity and is responsive to those stakeholders’ challenges. It offers a global solution at a time where several jurisdictional-specific less complex entity standards are emerging, which is not in the public interest.

The public consultation on this draft new standard is open until 31 January 2022.

Group Audits 
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ISA 600 (Revised) deals with special considerations that apply to a group audit, including when component auditors are involved. The standard includes new and revised requirements and application material that better aligns the standard with recently revised standards, such as International Standard on Quality Management 1 and International Standards on Auditing 220 (Revised) and ISA 315 (Revised 2019). The new and revised requirements also strengthen the auditor’s responsibilities related to professional skepticism; planning and performing a group audit; two-way communications between the group auditor and component auditors; and documentation.

ISA 315 (Revised 2019) 
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ISA 315 (Revised 2019) was approved at the September 2019 International Auditing and Assurance Standards Board (IAASB) meeting and is effective for audits of financial statements for periods beginning on or after 15 December 2021.

An audit is performed following a risk-based approach, and as such the provisions of ISA 315 (Revised 2019) are of utmost importance not only for planning the audit, but also ensuring the audit is executed in such a way that all risks are addressed.

The revised standard provides for major changes in the approach to identify and assess risks, which will ensure a focused response from auditors to these risks. The enhancements affect all audits and audit firms of all sizes will need to revise their approach to risk assessment.

The Quality Management Standards 
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Three new and revised standards strengthen and modernize the audit firm’s approach to quality management. Through the standards, the IAASB is addressing an evolving and increasingly complex audit ecosystem, including growing stakeholder expectations and a need for quality management systems that are proactive and adaptable.

The standards direct audit firms to improve the robustness of their monitoring and remediation, embed quality into their corporate culture and the “tone at the top”, and improve the robustness of engagement quality reviews.

The standards are effective 15 December 2022. They replace the IAASB’s current standards, International Standard on Quality Control 1, and International Standard on Auditing 2022.

QMS