Revised ISA 315 for 2022 audits

A guide to the revised requirements and implications for smaller ISA audits – effective for periods beginning on or after 15 December 2021.

The International Audit and Assurance Standards Board (IAASB) approved major changes to ISA 315 in September 2019. The changes will be effective for audits of financial statements for periods beginning on or after 15 December 2021. The effects of the revisions will be far-reaching and will require firms of all sizes to revise their approach to risk assessments. The following are the main areas of the revisions.

1. The introduction of five new inherent risk factors to aid in risk assessment; subjectivity, complexity, uncertainty, change and susceptibility to misstatement due to management bias or fraud.
2. A new spectrum of risk, at the higher end of which lie significant risks.
3. Requiring “sufficient, appropriate” evidence to be obtained from risk assessment procedures as the basis for the risk assessment.
4. A great deal more on IT, particularly IT general controls.   
5. More on controls relevant to the audit and on the design and implementation work required for these controls.
6. Removal of considerations specific to smaller entities as a separate category of paragraph and inclusion of that material within the main body of the text and the addition of new material.
7. Other changes including:

• requiring inherent and control risk to be assessed separately (the extant standard permits a combined assessment);
• distinguishing between direct and indirect control components; and
• a new stand-back requiring reconsideration, when material classes of transactions, account balance and disclosure are not assessed as significant.

The revisions aim to drive better quality and more consistent risk assessments, as well as promote the exercise of professional scepticism. 

Understanding the nature and extent of the changes required will be a significant task for those performing ISA audits.

Resources and useful links

• ISA 315 (Revised) Implementation tips - 17 March 2021: Practical implementation tips: This webinar explores how you might approach implementation of the new standard.
• A new approach to risk assessment - February 2021: This Audit & Beyond article considers the key changes in the revised standard.
• Identifying and assessing risk under ISA 315 (Revised) - 17 September 2020: This webinar looks at the key changes in the standard and to help you prepare for implementation.
• Audit risk assessment: changes on the horizon - 3 September 2020: The extensive revisions to ISA 315, effective for periods beginning on or after 15 December 2021, will have far-reaching effects for firms of all sizes.
• 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.