ICAEW broadly supports some of the proposed amendments, including the introduction of a ‘spectrum of risk’, the updated definition of a ‘significant risk’ and additional clarification regarding which controls are relevant to the audit. However, it does not believe that the proposals as given are usable for the audit of smaller and less complex companies due to scalability concerns. It believes that the revised standard will not be of practical benefit to small and medium-sized enterprises (SMEs).

Katharine Bagshaw, ICAEW manager of auditing standards, said: ‘ISA 315 is a cornerstone standard and changes to it will affect all other standards, too. Our main reservations are about the complexity and scalability of the proposals. Without further work to the standard itself, and implementation guidance, there is a huge risk that the proposals will be interpreted inconsistently across the board. That is not in the public interest.’

'If the IAASB wants to avoid the slow abandonment of ISAs for SMEs at a national level, it will need to do more to make this standard genuinely scalable for smaller entities. The belief that standard-setters do not need to concern themselves with smaller audits is wrong and short-sighted.

'The proposals are, unfortunately, cumbersome. The level of over-engineering will inevitably create confusion and inconsistencies. We are particularly concerned that the risk assessment process will be exceptionally difficult to navigate without the relevant flowchart, regardless of the size of the audit and that of itself demonstrates the need to revisit the text as a whole. More work is needed to render the proposals more concisely'.

Katharine Bagshaw’s analysis of the ISA 315 revisions for Accountancy Daily is here

Report by James Bunney