ACCA has renewed its call for the UK to adopt the International Standard on Auditing (ISA) for Less Complex Entities (LCE), arguing that the move would strengthen audit quality while providing a more proportionate framework for smaller businesses and the firms that audit them.
In its response to the Financial Reporting Council’s (FRC) consultation on improving the usability of the ISA for LCE, the global accountancy body said adopting the standard would enable auditors to focus more effectively on the specific risks and characteristics of less complex entities, helping to deliver more efficient, high-quality audits.
ACCA said the standard would benefit the wider audit profession, including small and medium-sized practices (SMPs), by providing a globally recognised framework specifically designed for audits of less complex organisations.
Glenn Collins, Head of Technical and Strategic Engagement, ACCA, said: “We have been long time supporters of using the IAASB auditing standard for LCE in the UK. We are clear it provides a framework for a consistent, efficient, high-quality audit that provides reasonable assurance. However, we strongly believe that a formal consultation on the adoption of the ISA for LCE is needed in the UK. A formal consultation on the ISA for LCE is needed to evidence consensus within the profession on the most appropriate way forward.”
Alongside its consultation on the standard, the FRC is also working with the International Auditing and Assurance Standards Board (IAASB) on proposed updates to the ISA for LCE covering fraud and going concern requirements.
Commenting on the proposed revisions, Lisa O’Sullivan, Senior Manager, Policy and Insights, EEMA & UK, ACCA, said: “We support retaining the rebuttable presumption of risk of material misstatement in relation to revenue recognition in the LCE. We would welcome examples in which a rebuttal would be appropriate to encourage appropriate implementation.”
ACCA also backed a proportionate approach to going concern procedures, recognising that many owner-managed businesses do not produce formal assessments of their ability to continue operating.
Collins added: “In LCE management’s assessment of going concern may not be formalised in many owner managed businesses. We would welcome examples of accessible evidence in the absence of formal procedures.”
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