Supporting the global profession
Simpler language and a simpler structure would benefit all auditors, as they would be able to understand auditing standards more easily, and could identify more quickly the requirements that apply to their specific situation.
For some time, it has been recognised that there are challenges in applying auditing standards to the audits of smaller and non-complex entities. In response, there is growing pressure to address these challenges.
Some practitioners are worried that auditing standards can be difficult to apply when auditing certain smaller companies and that the standards require procedures that are unnecessary.
While the benefits of audit are obvious for the largest companies, policymakers have debated how to respond to the cost-benefit question for smaller companies.
These pressures are continuing to grow and it is time to address them.
In 2004, the International Auditing and Assurance Standards Board (IAASB) commenced the significant project of revising and reformatting all its auditing standards to simplify their wording and structure.
The IAASB reworked every standard to separate its requirements from the application material that helps explain how to implement it properly.
The IAASB has a project team that has been collecting views from practitioners in order to understand the areas that concern auditors of small and medium-sized entities (SMEs). This feedback will be used to guide the IAASB's possible future responses.
Audit should be scalable
Historically, standard-setters have attempted to maintain a unitary approach to audit. This concept has sometimes been summarised by the phrase 'an audit is an audit'. Standards have attempted to protect audit as a single product that can be applied in a scalable and proportionate manner to all types of entity, recognising that a larger and more complex entity will result in a larger and more difficult audit.
ACCA's position is that it is advantageous to maintain a unitary approach to audit and to ensure that public confidence in the rigour of audit is sustained.
Revising auditing standards is a time-consuming process. The IAASB's previous project of revising and restructuring all auditing standards, known as the Clarity Project, took several years and soaked up considerable staff and volunteer time. However, over time this will deliver the benefits of simpler standards without imposing a large one-off cost.
The current standard-setting approach relies upon drafting and redrafting actual standards for review in working group and board meetings, and may take time for the board to become accustomed to this new methodology with less detailed drafting.
In the long run, the approach may make standard-setting more efficient if it serves to reduce the amount of board time spent redrafting standards.
While there may be some temporary issues while transitioning towards this new way of working, the benefits for users and for the public interest make this a price worth paying.
Supporting the global profession
• Auditors of less-complex entities could more readily understand the intention of standards
• It would be easier for the auditor of a less-complex entity to find the specific requirements that apply to their situation
• Separating the overall flow of the standard from its more detailed requirements allows all users to identify more easily those applicable to their specific situation
• It would also benefit audit regulators and other stakeholders with an interest in auditing because simpler standards would make it easier to understand expectations of an auditor and to find the requirements to a specific situation
• Writing auditing standards that have simpler language and a simpler structure would allow a wider range of users to understand them, helping to inform public understanding of audit