There are challenges involved in identifying and assessing audit risks for entities — in particular, those that vary in size and nature. Clearer or additional guidance is needed to help address these challenges.
As a result, the International Auditing and Assurance Standards Board (IAASB) is proposing revisions to ISA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding of the Entity and its Environment.
The IAASB proposal includes establishing more robust requirements and appropriately detailed guidance to drive auditors to perform appropriate risk assessment procedures in accordance with the size and nature of the entity. This would be done by focusing on enhancing the auditor’s approach to understanding the entity and risk assessment activities in light of the changing environment.
It is anticipated that the IAASB will consider whether and how ISA 315, in organization and structure, can be modified to promote a more effective risk assessment.