A New Standard for Audits of Less Complex Entities

Smaller, 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 IAASB developed a draft standard proportionate to the typical nature and circumstance of an audit of a less complex entity and responsive to stakeholders’ challenges. 

The public consultation on this draft new standard was open until January 31, 2022.  Since then, the IAASB has evaluated feedback received from the Exposure Draft, feedback survey, and outreach and is revising the draft to address stakeholder feedback.

When final, the standard will meet the growing global need for a separate standard for audits of less complex entities, while reducing the emerging risk of jurisdictional divergence.

Just Released

• The New Proposed Standard

  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
• Draft Standard & Related Materials
    Proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities French: Proposed International Standard on Auditing of Financial Statements of Less Complex Entities Spanish: Proposed International Standard on Auditing of Financial Statements of Less Complex Entities Proposed Supplemental Guidance: Authority of the Standard French: Proposed Supplemental Guidance: Authority of the Standard Proposed Supplemental Guidance: Auditor Reporting Proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities - Appendix 1 - Glossary of Terms Optional Response Template LCE Outreach Plan Discussion Paper: Audits of Less Complex Entities Feedback Statement and Way Forward- Audits of Less Complex Entities Less Complex Entities Communique 1: Update on Efforts to Address Issues Less Complex Entities Communique 2: Developing a Separate Standard for Audits of Less Complex Entities
• International Reference Group

  A key component of the IAASB's approach to less complex entities was establishing an international reference group. This Reference Group, comprised of representatives from the global community, reviewed and provided input into the new standard as it was drafted. 

• Complexity, Understandability, Scalability, Proportionality

  Responding to stakeholder feedback and consultations over a number of years, the IAASB developed a two-pronged approach to create a separate standard for less complex and simultaneously address complexity, understandability, scalability, and proportionality (CUSP) across all the International Standards on Auditing. Find out more about the CUSP workstream on the project web page.