SOCPA Shares its Comments on Creating Separate Standard for LCE
The International Auditing and Assurance Standards Board (IAASB) published an exposure draft concerning an independent Auditing standard for Less Complex Entities (ISA for LCEs). This proposal comes as a response from the Board to the needs of Practitioners and regulatory bodies to have professional guidance for less complex entities. The current basic auditing standards were improved upon and developed with time to be more suitable for complex entities, which led to further depth and complexity of the standards and their requirements and made them less suited for less complex entities.
The board considered the option of developing a separate standard for auditing LCEs among several options, including providing additional guidance or revising and developing the relevant current standards.
The aim of this move by the Board is to serve the public interest by maintaining confidence in the financial reports of LCEs, assisting auditors to conduct a consistent, effective, and high-quality audit of LCEs. It also demonstrates the Board's responsiveness to the needs of stakeholders and serves to promote consistency in the application of auditing standards when reviewing LCEs.
SOCPA represented by its standards Committee expressed its support - in principle - to the Board's proposal of drafting a separate auditing standard for LCEs that suits their needs and is less complex and easy to understand. However, SOCPA has noted some important observations and concerns worthy of the Board's attention.
The first of these concerns is that there will be additional reliance on auditors’ professional judgment, which may negatively affect the process of making a professional judgment. The second of SOCPA's concerns was about the complex approach of the Exposure Draft and the uninviting language it used which may make it difficult to adopt the standard. SOCPA has proposed in this regard some ideas and suggestions that will help develop and improve the approach and its language, making the standard less complex and inviting for adoption.
In addition to the above, SOCPA made its observation regarding the translation challenges that may arise from the intensive focus on summarizing the requirements of the basic auditing standards to suit the audit process on LCEs.
SOCPA detailed remarks can be found by clicking here.