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The audit of less complex entities

Update on the project
26 September 2022


The LCE Task Force will continue to analyse responses to the Exposure Draft of the proposed ISA for LCE and continue developing revised drafting in priority areas.

The IAASB board debated this topic at their meeting in June 2022 and again in September 2022,

The following matters were debated at the September meeting:

  • Authority of the standard
  • The approach to accounting estimates
  • Inclusion of group audits
  • Proportionality of the standard

In December 2022, the LCE Task Force plans to bring to the Board for discussion a full draft of Part 10, Audits of Group Financial Statements.


Consultation by IAASB 

Chartered Accountants Ireland welcomes the opportunity to consider the proposed International Standard on Auditing of Financial Statements of Less Complex Entities issued by the International Auditing and Assurance Standards Board (IAASB). The consultation is open until 31 January 2022. 

We are aware of the issues arising from the increasing complexity and voluminous nature of the International Standards on Auditing (ISAs) in particular in recent years the cost and value of an ISAs audit has been causing concern for many members and their clients.

The size and nature of the Irish economy means that we have a wide mix of businesses and, in common with the rest of Europe the threshold for a statutory requirement for audit has grown over recent years. However the audit threshold in Ireland remains at a significantly higher level than many other European countries resulting in many relatively small businesses still coming into the audit net.   

With this background we welcome the opportunity to review, discuss and debate the development of a standard that aims to serve entities outside large complex multinationals.

We are supportive of the aims of IFAC  and the globalisation of standards which we believe have successfully raised standards internationally. Piecemeal developments across the world in our view serve no purpose so we welcome the IAASB initiative to produce a standard which can be adopted across the globe. 

A working party from the Institute's Audit and Assurance Technical Committee will be reviewing the draft standard and application material in detail over the coming months.  We welcome comments from members interested in the project. Please send any comments to us via email.

Also the International Federation of Accountants and the IAASB have developed a survey to offer an alternative way to participate in the consultation and provide your views.

Our initial discussions with some member firms indicates that the standard will be a welcome development but there are matters to clarify and operational challenges such as education to resolve. Local implementation and scope are clearly going to be a crucial element of the standard, but we see strong support for a standard for LCE audit. 

IAASB outreach

The IAASB is undertaking a substantial targeted outreach program in collaboration with others, with the objective of collecting and encouraging feedback on the exposure draft from all stakeholders with an interest in audits of less complex entities.

Background to the proposed standard:

Key matters

  • The proposed standard for LCEs is intended to be a stand-alone self-contained standard, mixing between the LCE standard and the full ISAs will not be permissible.
  • The audit opinion issued under the LCE standard would still be a reasonable assurance opinion. The IAASB considered what the appropriate level of assurance would be for an audit under the LCE standard, and the view was that the standard should have requirements that would result in a reasonable assurance opinion. It was decided that it needed to clear in the auditor’s report which standard(s) have been used so that users of the financial statements have transparency as to which standards have been applied in conducting the audit.

The three most significant areas of change outlined by the IAASB are as follows:

  • Accounting estimates
  • Where the entity uses a service organization for processing transactions
  • Management amendments to the financial statements after the date of the auditor’s report

Potential issues for consideration

  • Group audits – consideration as to whether group audits should be allowed apply the LCE standard in certain circumstances (currently prohibited under the LCE ED). The IAASB are open to potentially allowing group audits under the LCE standard, Section 5 of the explanatory memorandum of the ED discusses this matter.
  • Training considerations – firms may face education challenges with two sets of auditing standards, however it should be broadly similar to the situation with IFRS vs FRS 102.

Proposed use: 

The IAASB have included a decision tree in the exposure draft which outlines which entities can and cannot apply the LCE standard: 

Decision tree

Further information

Two mapping documents compare the objectives and requirements of the existing full ISAs to the proposed new standard for audits of LCEs.

Mapping Document 1 covers Parts 1-7 of the LCE standard, which map to the following ISAs:

  • Part 1―ISA 200
  • Part 2― ISA 230, ISA 500, ISA 260 (Revised),
  • Part 3–-ISA 220 (Revised)
  • Part 4―ISA 210 and ISA 510
  • Part 5―ISA 300, ISA 320 and ISA 620
  • Part 6—ISA 315 (Revised 2019)
  • Part 7— ISA 520 and ISA 530

Mapping Document 2 covers Parts 7-9 of the LCE standard, which map to the following ISAs:

  • Part 7―ISA 240, ISA 250 (Revised), ISA 265, ISA 330, ISA 501, ISA 505, ISA 540 (Revised), ISA 550
  • Part 8―ISA 450, ISA 560, ISA 570 (Revised), ISA 580

Part 9―ISA 700 (Revised), ISA 705 (Revised), ISA 706 (Revised), ISA 710, ISA 720 (Revised)

Chartered Accountants Ireland can accept no responsibility for the content on any site that is linked to from the Institute website. Links are provided in good faith for the potential support of members and students.

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