— August 27, 2024 —
In recent years, the global auditing landscape has been closely examining the challenges faced by practitioners conducting audits of small entities, often referred to as Less Complex Entities (LCEs). These entities, typically small and micro enterprises, present unique challenges when applying the Canadian Auditing Standards (CASs). The complexity and scalability of these standards have led to discussions and proposals on how best to serve the public interest while ensuring high-quality and cost-effective audits.
The Global Context
The International Auditing and Assurance Standards Board (IAASB) has been at the forefront of addressing these challenges. In 2019, the IAASB issued a Discussion Paper, Audits of Less Complex Entities: Exploring Possible Options to Address the Challenges in Applying the ISAs, to better understand the issues practitioners face when auditing LCEs. This was followed by the 2021 Exposure Draft, Proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ED-ISA for LCE), which aimed to provide a globally consistent approach to LCE audits.
Canada’s Response
In Canada, the Auditing and Assurance Standards Board (AASB) has actively engaged with stakeholders to understand the implications of these global initiatives. After extensive deliberation and consultations, the AASB decided in 2024 not to adopt the IAASB’s proposed ISA for LCE. The primary concern was that the standard did not sufficiently tailor the requirements to meet the specific needs of Canadian practitioners and their clients. Furthermore, the introduction of two sets of auditing standards could have significant public interest implications, particularly in ensuring consistent and reliable audit quality across different types of entities.
Instead, the AASB has chosen to continue exploring alternative options that better align with the Canadian context. This includes providing input on CPA Canada’s implementation guidance and developing non-authoritative guidance tailored to the challenges faced in LCE audits.
Practical Solutions for Practitioners
In response to this recent development, David Baker, CPA, CA, has developed a comprehensive course titled Successfully Performing Small Audits. This course is designed to provide a refresher to both new and experienced practitioners performing audits of small entities. The content of this course will be invaluable to those performing these engagements in reinforcing best audit practices for small and micro entities and offering new ways to streamline these engagements.
David Baker, well-known and highly regarded as a presenter, offers insights that are directly applicable to the day-to-day challenges faced by practitioners based upon his years in public practice. Check out the course preview below. To register for this course, please click here.
References
- AASB Discussion Paper – Exploring Standard-Setting Options for Audits of Less Complex Entities, September 2021.
- IAASB Exposure Draft – Audits of Less Complex Entities, September 2021.
- AASB Decision Summary, Various Dates (2019-2024).
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