03 December 2018

ACCA responds to concerns on auditing standards for smaller and less-complex entities

As pressure grows to address auditing standards challenges to the audits of smaller and less-complex entities, ACCA’s Thinking Small First report reveals alternative ways to tackle the issue, without compromising on audit rigour.

It comes as the IAASB is set to consult on its strategy from 2020 to 2023.

There is growing concern that auditing standards can be difficult to apply to audits of smaller and less-complex entities. Suggested reforms currently on the table include exempting smaller companies from audit, or creating a separate set of auditing standards for those audits.

ACCA proposes that auditing standards should be written using simpler language and a simpler structure. A common complaint about auditing standards is their tendency to scale down, rather than scale up: standards set requirements as if the user is an auditor of a larger entity, with the expectation that SME auditors will do less.

Andrew Gambier, head of audit and assurance at ACCA, believes a better approach would be to explain what every auditor must do, and then elaborate the requirements as the size and complexity of the audited entity increases.

He said: ‘We have one set of auditing standards for audits of all sizes. However, the challenges in applying International Standards on Auditing to audits of smaller and less-complex entities have fuelled calls for change, including a different set of auditing standards for those entities. We propose that writing auditing standards in simpler language with a simpler structure is a better solution to this very real problem.

‘Furthermore we believe simpler language and simpler structure would benefit all auditors. Auditing standards could be more easily understood, with auditors able to identify more quickly the requirements that apply to their specific situation.

‘It would also be of benefit to the audit regulators and for the general public in terms of their understanding of audit.’

Full press release

Full report

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