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Exploring Actions for Less Complex Entities in IAASB

This project aims to develop recommendations for addressing challenges in applying standards for SMEs, through an in-depth environmental scan, feedback analysis, and stakeholder outreach. The outcome will be a balanced solution for providing reasonable assurance to smaller and less complex entities.

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Exploring Actions for Less Complex Entities in IAASB

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  1. IAASB Possible Actions Regarding Less Complex Entities Ron Salole, IAASB Member and Working Group Chair IAASB Meeting, New York Agenda Item 8 September 20, 2018

  2. The Journey So Far… ISA Implementation Monitoring highlighted challenges of applying standards for SME’s (2012 & 2013) Continuing outreach regarding scalability of standards (including with IFAC SMP Committee) Recognition in Strategy for 2015–2019 of importance of meeting needs of SME’s Paris Conference focused on understanding needs of SME’s / SMPs Working Group / IAASB discussions to consider issues and way forward (2017–2018) Project proposal to develop Consultation Paper (Sep 2018) 2017 & 2018 2017 2013 2018 2014 Page 2

  3. Exploring Possible Actions–IAASB Project Proposal Project proposal

  4. Exploring Possible Actions–IAASB Project Proposal Objective • Develop the Discussion Paper for Public Consultation • Confirm perceived issues and obtain views on possible actions • Develop recommendations for future Board action Project Scope • Confirm identified challenges and issues • Develop the Discussion Paper • Analyze feedback (and prepare a feedback statement) • Develop recommendations for Board consideration

  5. Exploring Possible Actions–Further Working Group Activities In-depth environmental scan • Academic review of existing literature • Compiled a list of research on matters related to SMP’s and SME’s (based on key words) • First list of research papers and other relevant articles received • Various papers on audit thresholds (exemption) and impact on audit / demand for audit for small entities • Demand for voluntary audit • Audit quality in audits of smaller entities • The role of small audits for studying the audit market • Spreadsheet use in small audit firms • Further outreach (e.g., NSS; INTOSAI) to understand challenges and issues • Consideration of further surveys Outreach when Discussion Paper out for comment • Second SME/SMP Working Conference (possibly May 2019) • Other roundtables?

  6. Possible Actions to be Presented in Discussion Paper For stakeholder views – will help inform project proposal for further IAASB actions Working Group to still consider content, but exploring: • Other ways providing assurance for stakeholder needs • What more can be done in the ISAs to address complexity of the standards • Content and presentation of a separate ISA for audits of less complex entities • Guidance that may be needed for applying the ISAs to less complex entities

  7. SMPC Letter SMPC welcomes the initiative and fully supports the IAASB’s efforts in this area Important to give greater consideration to matters related to SMPs and SMEs Outcome should be an informed and balanced solution Support calls for a ‘bottom-up’ approach Definition of scope of ‘smaller and less complex entity’ is critical In exploring a different way to obtain reasonable assurance (not using the full ISAs) need to manage expectations and perceptions Important to present possible solutions in a balanced manner

  8. Discussions with the CAG Support for exploring the topic – important topic • Challenges in this project recognized • Support for the timeline Some concern about the outcome of the project • Caution about different level of assurance • An audit is an audit – need to explore if there is a different way to obtain reasonable assurance • Need to be able to apply ISAs to a wide variety of entities Suggestions about what could be done • Think small first • Think about where optionality is (requirements or guidance)

  9. Timeline

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