Complexity in ISAs could pose challenges for audits of smaller firms

Smaller, less complex entities make significant contributions to the global economy, where audits play a due role, according to chartered accountants.

At the same time, increasingly complex structures and transactions need to be addressed through the development and revision of the International Standards on Auditing (ISAs) for those entities, they said.

The International Audit and Assurance Standard Board (IAASB) recognises that ISAs could pose challenges for audits of less complex entities, said a press release from the Institute of Chartered Accountants of Bangladesh (ICAB).

Various chartered accountants made these comments while addressing a webinar on "Audit of less complex entities" organised by the ICAB.

Prof Md Hamid Ullah Bhuiyan, chairman of the Financial Reporting Council (FRC), attended the webinar as chief guest.

Md Shahadat Hossain, president of the ICAB, M Anwarul Karim, executive director (standard setting), and Md Yasin Miah, a council member, spoke as panelists.

Sabbir Ahmed, a council member of the association, presented the keynote paper while Kamrul Abedin, a council member and former president, moderated the webinar.

They said the ISAs are designed to be applied to a wide variety of entities with differing circumstances and sizes.

In general, less complex entities have smaller capital, limited day-to-day transactions and see small turnover.

It is estimated that more than 90 per cent of the business entities across the world are small and medium enterprises, the chartered accountants said.

"Some stakeholders have, therefore, already questioned whether the ISAs remain relevant and can be applied in a cost-effective manner to all audits," said ICAB President Hossain.

The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements of an entity. The ISAs are designed to provide the basis for a reasonable assurance opinion in an audit, he added.