Recommend: The SCALABILITY of ISA 315 (Revised 2019)

SA 315 (Revised 2019), Identifying and Assessing the Risks of Material Misstatement, has been amended by the International Auditing and Assurance Standards Board (IAASB) to include a more robust and consistent risk identification and assessment. 1 The revised standard is effective for audits of financial statements for periods beginning on or after 15 December 2021 already. 2

ISA 200, Overall Objective of the Independent Auditor, and the Conduct of an Audit in Accordance with International Standards on Auditing, states that some International Standards on Auditing (ISAs) include scalability considerations which illustrate the application of the requirements to all entities regardless of whether their nature and circumstances are less complex or more complex. 3 ISA 315 (Revised 2019) is one of these ISAs. It is intended for audits of all entities, regardless of size or complexity and the application material therefore incorporates considerations specific to both less and more complex entities, where appropriate. Important to note is that while the size of an entity may be an indicator of its complexity, some smaller entities may be complex, and some larger entities may be less complex. 4

Summary
The purpose of this summary is to showcase the scalability of ISA 315 (Revised 2019), with reference to its application material.
The application material in ISA 315 (Revised 2019) provides scalability considerations relating to the following table:

Example
Let’s have a look at an example on the engagement team discussion:

The revised standard requires the following as per paragraphs 17-18 (with further guidance provided in paragraphs A42−A46 of the application material):

‘The engagement partner and other key engagement team members shall discuss the application of the applicable financial reporting framework and the susceptibility of the entity’s financial statements to material misstatement. When there are engagement team members not involved in the engagement team discussion, the engagement partner shall determine which matters are to be communicated to those members.’

So, what if the engagement is carried out by a single individual, such as a sole practitioner, and an engagement team discussion is therefore not possible?

Paragraph A44 of the application material says that consideration of the matters referred to in paragraphs A42 and A46 nonetheless may assist the auditor in identifying where there may be risks of material misstatement.

And if an engagement is carried out by a large engagement team, such as for an audit of group financial statements, where it is not always practical for the discussion to include all members in a single discussion (for example in a multi-location audit)?

Paragraph A45 of the application material says that the engagement partner may discuss matters with key members of the engagement team including, if considered appropriate, those with specific skills or knowledge, and those responsible for the audits of components, while delegating discussion with others, taking into account the extent of communication considered necessary throughout the engagement team. A communications plan, agreed by the engagement partner, may be useful.

To conclude
For more information on ISA 315 (Revised 2019), please refer to our website: https://www.saica.org.za.

Notes
1 https://www.iaasb.org/publications/isa-315-revised-2019-identifying-and-assessing-risks-material- misstatement.
2 ISA 315, paragraph 10.
3 ISA 200, paragraph A65a.
4 ISA 315 (Revised 2019), paragraph 9.

AUTHORS
Michelle Vermeulen CA(SA), Project Manager: Assurance at SAICA