Auditors have identified scalability challenges in applying the Canadian Auditing Standards (CASs) to audits of less complex entities (LCEs), which are non-listed entities, including smaller owner-managed entities and smaller not-for-profit organizations.
In response, in January 2025 the AASB established the Audits of Less Complex Entities Working Group, a multidisciplinary group with broad membership from across the LCE audit ecosystem. The Group focuses on identifying and pursuing timely and impactful actions to support efficient and effective LCE audits by:
- responding to LCE audit issues: supporting the LCE audit ecosystem by responding to issues related to application of the CASs to LCE audits. This may include the development of practical guidance to address such issues;
- influencing scalability in the CASs: working with the AASB to support scalability and proportionality in new and revised CASs, including through input on exposure drafts and post‑implementation reviews; and
- monitoring emerging LCE audit issues: informing the AASB of significant developments in the LCE audit ecosystem.
Visit the Audits of Less Complex Entities Working Group members page to learn about the group’s responsibilities and membership.
Background
Issues in audits of less complex entities (LCEs) are experienced by auditors worldwide. In response, the International Auditing and Assurance Standards Board (IAASB) issued the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (the ISA for LCE) in December 2023.
The AASB decided not to adopt the ISA for LCE. In the AASB’s view, it would not adequately meet the needs of interested and affected parties in Canada and serve the public interest for the following reasons:
- The specific aspects of the ISAs, identified by auditors as challenging to apply in audits of LCEs in Canada, have not been sufficiently tailored for such audits to facilitate the potential of a widespread application of the ISA for LCE in Canada.
- There are continuing concerns around the public interest implications of having two sets of auditing standards considering the limited benefits expected.
Instead, the AASB established the Audits of Less Complex Entities Working Group with the mandate and actions described on this page.