ISA’s are the International Standards on Auditing. There are regular changes, revisions and new ISA’s implemented across the audit world. A recent revision to ISA 315 is well talked about, due to the significant changes it brings to audits.
ISA 315 covers ‘Identifying and Assessing the Risks of Material Misstatement’ and the revised ISA is effective for accounting periods beginning on or after 15th December 2021 – in most cases this will be for 2022 year ends onwards.
The key areas that this covers include:
- Introduction of five new inherent risk factors to assist auditors to assess risk in auditing financial statements. These include subjectivity, complexity, uncertainty, change and susceptibility to misstatement due to management bias or fraud
- A new spectrum of risk – from low to significant risks
- Requirement for sufficient, appropriate audit evidence to be obtained from risk assessment procedures as the basis for the risk assessment
- More focus on IT and general IT controls
- More focus on general system and procedure controls relevant to the audit and the risk of misstatement
- Considerations relating to audits of smaller entities is now included within the main body of the ISA so we have to consider these matters for entities of all sizes
As a minimum, you can expect your auditors to require further information around controls and systems, as well as IT controls relevant to your organisation.
Our advice is to always have your systems and control procedures documented where possible. Where an entity is small and management have oversight over the day-to-day transactions, make note of this and where segregation of duties is maintained.
We will be contacting all audit clients to update our records for the above changes in due course.