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ISAs for Smaller Audits

Updated: Dec 28, 2022

ISAs do not distinguish the audit approach required for a one-person entity from that required for a multinational entity employing thousands of people.

An audit is an audit.

Consequently, the basic approach to an audit does not change just because the entity is small.

The word “audit” is intended to convey a clear message to users of financial statements.

That message is that the auditor has obtained reasonable assurance that the financial statements are free from material misstatements, regardless of the size or type of the entity that has been audited.






This issue of proportionality was addressed by IAASB staff in a Staff Questions and Answers document, entitled Applying ISAs Proportionately with the Size and Complexity of an Entity, issued in August 2009.

Its purpose is to assist auditors in applying the clarified ISAs in a cost-effective manner.

IAASB 工作人员在2009年8月发布的题为《根据实体的规模和复杂性适度应用国际审计准则》的工作人员问答文件中讨论了这个比例问题。

其目的是协助审计师以具有成本效益的方式应用明晰化 (Clarity) 的国际审计准则。

The response to the question “How do the ISAs address the fact that the characteristics of an SME are significantly different from those of a larger, more complex entity” was as follows:


“The auditor’s objectives are the same for audits of entities of different sizes and complexities.

This, however, does not mean that every audit will be planned and performed in exactly the same way.

The ISAs recognise that the specific audit procedures to be undertaken to achieve the auditor’s objectives and to comply with the requirements of the ISAs may vary considerably depending on whether the entity being audited is large or small and whether it is complex or relatively simple.




The requirements of the ISAs, therefore, focus on matters that the auditor needs to address in an audit and do not ordinarily detail the specific procedures that the auditor should perform.

The ISAs also explain that the appropriate audit approach for designing and performing further audit procedures depends on the auditor’s risk assessment.

For example, based on the required understanding of the entity and its environment, including its internal control and the assessed risks of material misstatement, the auditor may determine that a combined approach using both tests of controls and substantive procedures is an effective approach in the circumstances in responding to the assessed risks.




In other cases, for example, in the context of an SME audit where there are not many control activities in the SME that can be identified by the auditor, the auditor may decide that it is efficient to perform further audit procedures that are primarily substantive procedures.

It is also important to note that the ISAs acknowledge that the appropriate exercise of professional judgment is essential to the proper conduct of an audit.

Professional judgment is necessary, in particular, regarding decisions about the nature, timing, and extent of audit procedures used to meet the requirements of the ISAs and gather audit evidence.






However, while the auditor of an SME needs to exercise professional judgment, this does not mean that the auditor can decide not to apply a requirement of an ISA except in exceptional circumstances and provided that the auditor performs alternative audit procedures to achieve the aim of the requirement.”


The key points in the excerpt above can be summarised as follows:

  • Audit objectives are the same for any size of audit;

  • The specific audit procedures required may vary considerably depending on the size of entity and the assessed risks;

  • The ISAs focus on matters the auditor needs to address — not on the details of specific procedures;

  • The design of further audit procedures depends on the auditor’s risk assessment;

  • The appropriate exercise of professional judgment is essential in tailoring the procedures to respond appropriately to the assessed risks; and

  • Professional judgment cannot be used to avoid compliance with any ISA requirements except in exceptional circumstances.


  • 审计目标对于任何规模的审计都是一样的。

  • 所需的具体审计程序可能有很大的不同,这取决于实体的规模和所需的具体审计程序可能会有很大的不同,这取决于实体的规模和评估的风险。

  • 《国际审计准则》的重点是审计师需要处理的事项--而不是具体程序的细节。

  • 进一步审计程序的设计取决于审计师的风险评估。

  • 适当行使专业判断对于调整程序以适当应对评估的风险至关重要;以及

  • 除非在特殊情况下,不能用专业判断来避免遵守《国际审计准则》的任何要求。

Some suggestions | 一些建议

In addition, the ISAs contain a number of paragraphs that address considerations specific to audits of SMEs.

Some suggestions for successfully implementing ISAs on smaller engagements are included below.