Regulatory updates

Recently, the International Auditing and Assurance Standards Board (IAASB) issued the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCEs). It is a new standalone auditing standard and contains all requirements necessary to obtain reasonable assurance regarding whether the financial statements as a whole are free from material misstatements, whether due to fraud or error. The ISA for LCEs cannot be used if:

• Law or regulation prohibits the use of the ISA for LCE or specifies the use of auditing standards other than ISA for LCE for the audit of the financial statements in that jurisdiction
• Entity is a listed entity
• Entity falls into one of the following classes:

• An entity one of whose main functions is to take deposits from the public
• An entity one of whose main functions is to provide insurance to the public, or
• A class of entities where use of the ISA for LCE is prohibited for that specific class of entity by a legislative or regulatory authority or relevant local body with standard-setting authority in the jurisdiction.
• Certain group audits

The standard comprises of nine parts:

• Other conditions relating to issuance of ZCZP instruments: SEBI has laid down certain other conditions w.r.t. the issuance of ZCZP instruments. Some of these include:

• Part 1: Fundamental concepts and general principles
• Part 2: Audit evidence and documentation
• Part 3: Engagement quality management
• Part 4: Acceptance or continuance
• Part 5: Planning
• Part 6: Risk identification and assessment
• Part 7: Responding to assessed risks of material misstatement
• Part 8: Concluding, and
• Part 9: Forming an opinion and reporting.

Effective date: The ISA for LCEs would be effective for audits of financial statements for periods beginning on or after 15 December 2025. Early adoption is permitted.

To access the text of the standard, please click here