The XRB consulted on the adoption of ISA for LCEs in New Zealand for use on audits of less complex entities.

CA ANZ and CPA Australia have lodged a joint submission to the XRB on its proposed ISA (NZ) for Less Complex Entities (ISA (NZ) for LCEs). We are supportive of the adoption of ISA for LCEs in New Zealand, including the addition of a section dealing with the audit of service performance information to the proposed auditing standard.

• We have heard overall enthusiastic support for making ISA (NZ) for LCEs available to audit practitioners in NZ to adopt if they choose, including from firms and the Office of the Auditor- General.
• On balance we believe that the benefits from the standard, which should drive efficiency and audit quality in New Zealand, which has a large population of less complex entities subject to audit, outweigh the identified costs and risks. We believe many of the risks can be mitigated.
• We support the exclusion of audits of Financial Market Conduct (FMC) Reporting Entities considered to have a higher level of public accountability but believe the scope of the ISA (NZ) for LCE does not require further modification for New Zealand.
• While we heard some concerns in relation to the intended periodic maintenance schedule of the ISA for LCE internationally, we support the periodic approach on the basis that it is a similar model as is used for IFRS for SMEs in jurisdictions that have adopted that standard, and that model seems to work well. Given the volume of change to the auditing standards is generally less than for the accounting standards, we do not think periodic updates should cause problems. On the contrary, a limited moratorium – meaning audit standards are being updated periodically rather than continuously – is likely to make dealing with change more practical for firms working primarily with LCEs, without losing the overall strengthening of standards over time.