An exposure draft has been issued on Standard on Auditing for Audits of Smaller and Less Complex Entities (SASE) 200, Overall Objectives of the Independent Auditors and the Conduct of an Audit in accordance with Standards on Auditing for Audits of Smaller and Less Complex Entities” (hereinafter referred to as ‘SASE 200’). This Standard on Auditing deals with the overall responsibilities of an independent auditor when conducting audit of financial statements of smaller and less complex entities.

Why these standards ?

The present Standards on Auditing encompasses and audit requirements for large and complex business entities such as listed companies, public interest in companies, etc.. The present standards provide in-depth guidance and are more suitable for large entities. This required auditors to perform too many procedures while auditing smaller and less complex entities. Smaller and less complex entities may not have proper structure, may have lesser controls, less complex IT software, etc. Due to this, the compliance burden was increasing for auditors.

The International Auditing and Assurance Standards Board (IAASB) also recognised the issue of audit of such type of entities. ICAI identified those issues and decided to propose separate Standards in Auditing for Audits of Smaller and Less Complex Entities (SASE).

Smaller and less complex entities

Entities which have concentration of ownership and management in a small number of individuals; Straightforward or uncomplicated transactions; Simple record-keeping/cash basis of accounting/centralized accounting with use of less complex IT system; Few lines of business and few products within business lines; Few internal controls; Few levels of management with responsibility for a broad range of controls; Few personnel, many having a wide range of duties; Use of less complex IT systems, etc. shall be categorized as smaller and less complex entities.

Key topics of proposed auditing standards

The exposure draft SASE 200 is first draft in this series. The exposure draft on SASE 200 covers the following:

  a. Scope of SASEs;

  b. Guidance in preparation and presentation of financial statements of smaller and less complex entities as per applicable financial reporting framework;

  c. Overall objectives of the auditors of smaller and less complex entities;

  d. Definition of smaller and less complex entities;

  e. Ethical requirements relating to an audit of financial statements of smaller and less complex entities;

  f. Sufficient and appropriateness of audit evidence collected by an auditor during audit of financial statements of smaller and less complex entities; and

  g. Requirement to comply with relevant SASEs.

 

Source : Times of India