IAASB proposes tweaking standard for auditing less complex entities

The International Auditing and Assurance Standards Board proposed a set of revisions to the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities and is asking for public comments.

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The proposed revisions update the ISA for LCE to address various developments related to fraud and going concern, while ensuring the requirements remain suited to audits of less complex entities. The proposal could help auditors and accountants who tend to work with smaller businesses.

“The IAASB designed the ISA for LCE to deliver an appropriately tailored, high-quality audit standard for less complex entities while maintaining the same objective as the ISAs: obtaining reasonable assurance,” said IAASB chair Tom Seidenstein in a statement Wednesday. “These proposed revisions demonstrate our commitment to keeping the standard current and responsive to developments in auditing while ensuring it continues to address evolving public interest expectations in a way that remains proportionate for audits of less complex entities.”

The exposure draft includes proposed updates in several areas, incorporating recent revisions to auditor responsibilities relating to fraud, and addressing recent developments in auditor responsibilities related to going concern.

The proposed revisions would also replace the term “listed entity” with “publicly traded entity” for which use of the standard is prohibited. They would preserve interoperability with the International Code of Ethics for Accountants (including International Independence Standards), issued by the International Ethics Standards Board for Accountants.

In the short time since the standard was issued in December 2023, over 30 jurisdictions have adopted the ISA for LCE, and several others are actively considering its use. 

The IAASB is asking for stakeholder feedback on whether the proposed revisions maintain the relevance of the ISA for LCE by addressing significant developments in a proportionate way that reflect the typical nature and circumstances of audits of less complex entities. The IAASB is also seeking input on the timeframe for future maintenance of the ISA for LCE. The due date for comments from stakeholders, including auditors, regulators, oversight authorities, national standard setters, preparers and investors, is Nov. 17, 2026.