ICAEW.com works better with JavaScript enabled.

Introducing the new risk assessment ISA for 2022 audits

14 January 2020: the IAASB has issued ISA 315 (Revised 2019) Identifying and Assessing the Risks of Material Misstatement.

The last major revision to the standard was back in 2003. ISA 315 (Revised 2019) introduces more robust risk identification and assessment to drive a more focused response to the identified risks. “The enhancements are significant and will require changes in approach to risk assessments by auditors,” says Katharine Bagshaw, Auditing Standards Technical Manager in the Audit and Assurance Faculty. “Over the coming months we will be considering what implementation guidance might be needed to help support our members and we have set up a working group to focus on this.”

When is it effective?

The revised standard is effective for audits of financial statements for periods beginning on or after 15 December 2021.

This might seem like quite a long way off, but it really isn’t. Auditors will need this time to understand the revised requirements and apply them to their audit methodologies.

What are the key changes?

Key areas of change include:

  • clarifying that the risk assessment process provides the basis for identifying and assessing the risks of material misstatement, and the design of further audit procedures; 
  • separate focus on understanding the applicable financial reporting framework;
  • distinguishing the nature, and clarifying extent, of work needed for indirect and direct controls in the system of internal control;  
  • clarifying which controls need to be identified for the purpose of evaluating the design of a control, and determining whether the control has been implemented; 
  • enhanced requirements on exercising professional scepticism and strengthened documentation requirements; 
  • principles-based requirements focusing on "what" needs to be done and application material highlighting proportionality and scalability considerations;
  • considerations for using automated tools and techniques within the application material and supporting Q&A from IAASB’s Technology Working Group;
  • the inclusion of the concept of the "spectrum of inherent risk" (a concept also introduced in ISA 540 (Revised)), with significant risk being at the upper end of the spectrum;
  • a separate assessment of inherent risk and control risk, and five "inherent risk factors" to focus the auditor on the susceptibility of assertions to misstatement; and
  • a new "stand-back" to evaluate the completeness of the significant classes of transactions, account balances and disclosures at the end of the risk assessment process. 

Where can I find out more?

For more information please visit Revised ISA 315 for 2022 audits. We will be updating this page with information and guidance over the forthcoming months.

You can also access the revised standard, an introduction to ISA 315 (Revised 2019) factsheet, and the IAASB ISA 315 (Revised 2019) implementation plan on IAASB’s website.