Increasingly complex structures and transactions need to be addressed through the development and revision of the International Standards on Auditing (ISAs) for less complex entities (LCEs), chartered accountants suggested at a programme.
They observed that smaller and LCEs make a critical contribution to the world economy which accounts for the majority portion of global audits. The International Audit and Assurance Standard Board (IAASB) recognizes that reflecting this complexity in the ISAs could pose challenges for audits of LCEs.
They suggested developing a separate standard for LCEs which would distinguish the standard from the ISAs by referring specifically to audits of LCEs, while also maintaining identification as a global IAASB standard.
The suggestions came at a webinar on Sunday on 'Audit of Less Complex Entities' organized by the Institute of Chartered Accountants of Bangladesh (ICAB).
Professor Hamid Ullah Bhuiyan, chairman of the Financial Reporting Council (FRC), Bangladesh attended the webinar as the chief guest.
Sabbir Ahmed, council member of ICAB and partner, Hoda Vasi Chowdhry and Co., Chartered Accountant presented the keynote paper.
Speakers noted that usually, LCEs are the entities that have smaller capital, limited day to day transactions, a simple operating system and have small turnover. It is estimated that more than 90% of entities across the world are small and medium-sized entities (SME), with some regions estimating that the percentage could be higher, such as in the European Union where it is estimated that over 99% of entities are SMEs.
In the case of emerging economies like Bangladesh, the scenario is the same, they added.
They said that the International Standards on Auditing (ISAs) are designed to be applied to a wide variety of entities, ranging from those whose nature and circumstances are simpler and more straightforward to those entities whose nature and circumstances are more complex.
ICAB President Shahadat Hossain said that the IAASB acknowledged that the volume and complexity of the standards may result in challenges for audits of entities that are less complex.
He said that the purpose of an audit is to enhance the degree of confidence of intended users in the financial statements of an entity.
The auditor achieves this by obtaining sufficient appropriate audit evidence to reduce audit risk to an acceptably low level in the circumstances of the engagement.
Shahadat Hossain proposed that the new standard could be titled as 'International Standard on Auditing (ISA) for Audits of Financial Statements of the Less Complex Entities (ISA for LCE),' which would distinguish the standard from the ISAs by referring specifically to audits of LCEs, while also maintaining identification as a global IAASB standard.