The original IAASB draft of a separate Proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities – ISA for LCE did not include any intentions of carrying out group audits.

On the basis of feedback from the interest groups, the IAASB has now reconsidered this decision and developed proposals that, under certain circumstances, should allow the application of the proposed ISA for LCE for audits of group financial statements.

Inclusion of the Component Auditor as Criterion of Applicability

The current draft of the IAASB proposes that ISA for LCE cannot be applied if component auditors are used. However, this ban should not apply if the involvement of the component auditor is limited to circumstances that require a physical presence for a certain audit procedure for the group audit (for example, participation in an inventory count of the inspection of fixed assets).

Cases of Non-Applicability

If units that are quoted on the stock market or, for example, receive deposits or offer insurance policies, are included in the group audit, the standard for the audit of financial statements of less complex entities should not be applicable, without exception.

Additional Criteria

Furthermore, the draft included additional criteria that should be met so that the standard for auditing the financial statements of less complex entities can also be applied to audits of group financial statements, for example:

• the group contains just a few units that are active in very few legal systems,
• the group management can facilitate access to information and people for the Engagement Team and
• the consolidation process has a simple structure.