1. IAASB Possible Actions Regarding Less Complex Entities
Ron Salole, IAASB Member and Working Group Chair
IAASB Meeting, New York
Agenda Item 8
September 20, 2018

2. The Journey So Far…
ISA Implementation Monitoring highlighted challenges of applying standards for SME’s (2012 & 2013)
2013
2014
Continuing outreach regarding scalability of standards (including with IFAC SMP Committee)
Recognition in Strategy for 2015–2019 of importance of meeting needs of SME’s
2017
Paris Conference focused on understanding needs of SME’s / SMPs
Working Group / IAASB discussions to consider issues and way forward (2017–2018)
2017 & 2018
2018
Project proposal to develop Consultation Paper (Sep 2018)
Page 2

3. Exploring Possible Actions–IAASB Project Proposal
IAASB Discussions
Other relevant developments (environmental changes and jurisdictional initiatives)
Project proposal
IAASB recognition that further exploration of possible actions needed

4. Exploring Possible Actions–IAASB Project Proposal
Objective
Develop the Discussion Paper for Public Consultation
Confirm perceived issues and obtain views on possible actions
Develop recommendations for future Board action
Project Scope
Confirm identified challenges and issues
Develop the Discussion Paper
Analyze feedback (and prepare a feedback statement)
Develop recommendations for Board consideration

5. Exploring Possible Actions–Further Working Group Activities
In-depth environmental scan
Academic review of existing literature
Compiled a list of research on matters related to SMP’s and SME’s (based on key words)
First list of research papers and other relevant articles received
Various papers on audit thresholds (exemption) and impact on audit / demand for audit for small entities
Demand for voluntary audit
Audit quality in audits of smaller entities
The role of small audits for studying the audit market
Spreadsheet use in small audit firms
Further outreach (e.g., NSS; INTOSAI) to understand challenges and issues
Consideration of further surveys
Outreach when Discussion Paper out for comment
Second SME/SMP Working Conference (possibly May 2019)
Other roundtables?

6. Possible Actions to be Presented in Discussion Paper
For stakeholder views – will help inform project proposal for further IAASB actions
Working Group to still consider content, but exploring:
Other ways providing assurance for stakeholder needs
What more can be done in the ISAs to address complexity of the standards
Content and presentation of a separate ISA for audits of less complex entities
Guidance that may be needed for applying the ISAs to less complex entities

7. SMPC Letter
SMPC welcomes the initiative and fully supports the IAASB’s efforts in this area
Important to give greater consideration to matters related to SMPs and SMEs
Outcome should be an informed and balanced solution
Support calls for a ‘bottom-up’ approach
Definition of scope of ‘smaller and less complex entity’ is critical
In exploring a different way to obtain reasonable assurance (not using the full ISAs) need to manage expectations and perceptions
Important to present possible solutions in a balanced manner

8. Discussions with the CAG
Support for exploring the topic – important topic
Challenges in this project recognized
Support for the timeline
Some concern about the outcome of the project
Caution about different level of assurance
An audit is an audit – need to explore if there is a different way to obtain reasonable assurance
Need to be able to apply ISAs to a wide variety of entities
Suggestions about what could be done
Think small first
Think about where optionality is (requirements or guidance)

9. Timeline Timing Action July 2018 to March 2019
Activities related to development of Discussion Paper
March 2019
CAG consideration of Discussion Paper
IAASB to consider and approve Discussion Paper
May-June 2019
Roundtables and other outreach as necessary
September 2019
IAASB to consider feedback; feedback statement