Public letter to the IAASB: progress on draft standard for auditing less-complex entities

Accountancy Europe calls on the IAASB to achieve clear progress towards a draft standard for auditing less-complex entities (LCEs)/ small and medium-sized enterprises (SMEs) by end 2020. 

This is especially urgent as:

• we have observed increasing audit thresholds in Europe over the past 15 years
• countries have started developing their own LCE audit standards
• the coronacrisis has put LCEs/SMEs at heightened going concern risks and auditors need fit–for–purpose standards to be able to bring credibility to suppliers or lenders using their accounts

We believe in using the existing ISA framework to draft a standard that is no longer too complex for LCEs’ needs as the current ISAs are. This will ensure consistent audit approaches globally. 

Our response (Sept 2019) to the relevant IAASB’s consultation already highlighted the following 3 priorities for the IAASB: 

1. develop a separate standard for LCE audits based on the ISAs
2. use the separate standard as an opportunity to revise the ISAs as a whole with a think simple first/building blocks approach
3. anticipate, and plan converging exercises 1 and 2

This followed on our call for action (May 2018) for the IAASB to explore the best solution.

An independent task force already explored such options in our Cogito publication Simplifying auditing standards for small or non-complex entities (April 2018).