As we forecast in our 1 July blog, the Financial Reporting Council published new draft guidance to assist auditors of Smaller Less Complex Entities with the audit process.
The new Practice Note (PN) is called ‘Guidance for Auditors of Smaller Less Complex Entities’ loosely based on the well-loved Practice Note 26 ‘Guidance on Smaller Entity Documentation’, which was withdrawn in 2018. It contains some of the examples from the original PN 26 updated for the latest trends in accounting software by including mention of Xero and Quickbooks.
PNs are well regarded among the audit profession as indicative of best practice and are intended to assist auditors and regulators alike, in applying auditing standards of general application to particular circumstances and industries and are regarded as persuasive rather than prescriptive. According to the Financial Reporting Council, the draft PN may already be used in helping auditors to determine what best practice audit documentation should look like in the audit of a small or less complex entity.
This PN is designed to assist auditors in applying auditing standards of general application to particular circumstances and industries.
The draft PN is available for consultation until 17 October 2025, and the final version should be published by Q4 of 2025.
According to the draft PN the characteristics that typically define smaller and/or less complex entities are:
- Ownership and control are often concentrated among a few individuals.
- Operations are uncomplicated, with limited sources of income and activities.
- Business processes and accounting systems are simple, with few internal controls.
- Entities may include small companies, charities, and larger entities with simple structures.
- Complexity may arise in specific areas, such as accounting estimates, even in otherwise simple entities.
For audit cold file reviews and tailored training sessions explaining more about various topics like AML, Audit, FRS 102, please send a mail to john@jmcc.ie.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
- Our latest CPD Webinar on The Main Changes in Irish GAAP (recorded July 2024)
- Anti-Money Laundering Policies Controls and Procedures Manual (March 2022) — View the table of contents
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion you receive a CPD certificate for attendance in your inbox.
- Letters of engagement and similar templates—Please visit our website here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items bought together.
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
