ICAI releases separate set of standards for audits of smaller and less complex entities; seeks public comments

New Delhi, Dec 29 (KNN) The Auditing and Assurance Standards Board (AASB) of the Institute of Chartered Accountants of India (ICAI) has recently issued Exposure Draft of ‘Standard on Auditing for Audits of Smaller and Less Complex Entities (SASE) 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Standards on Auditing for Audits of Smaller and Less Complex Entities’.

As per the directions of the Council of ICAI, AASB has decided to issue a separate set of standards for audits of smaller and less complex entities.

The concern behind this was discussed that the standards on auditing have been developed keeping in mind the public interest and consequently the listed entities. Since standards are principal based these were made applicable to all entities.

Since, standards are principal based these were made applicable to all entities. Concern was raised internationally that the audits of small and medium enterprises (SMEs) particularly audits of less complex entities do not require the compliances as per Standards in place.

The International Auditing and Assurance Standards Board (IAASB) also recognized the issue and held a specific conference in Paris in January 2017 and thereafter had regular meetings and discussions on the issue and finally the agenda was taken to address the challenges being faced by SMPs in case of audit of SMEs.

 It was also discussed that to simplify the Standards, it should be suitable for implementation in case of audit of SMEs ensuring the quality in reporting.

In the Indian scenario, there are large numbers of SMEs and audits of SMEs are conducted by a large number of SMPs. In India, all entities particularly those in the corporate sector are required to get their accounts audited and even in case of the non-corporate sector also, the audit is mandatory under tax laws and other laws.

AASB, therefore, took the view to address the issue by having a separate set of standards for audits of smaller and less complex entities. AASB also discussed that the need is only to simplify the standards for effective implementation and that the quality in reporting shall be maintained, in the same series of the extant SA’s part of the existing framework and accordingly, the preface be modified to include this series.

Against this backdrop, ICAI has invited members of council, past presidents, regional councils and branches of regional councils of the institute as well as various bodies for suggestions and views on this exposure draft latest by January 17, 2019.

The exposure draft is also hosted on the website of the institute and can be downloaded from https://resource.cdn.icai.org/52956aasb42499.pdf.