Introduction
The guide explains the purpose and development of the ISA for LCE, a standalone auditing standard designed to address concerns about the length, complexity and understandability of the ISAs when applied to less complex entities. It outlines that the ISA for LCE aims to provide proportionate, principles-based requirements enabling auditors to obtain sufficient appropriate evidence to express a reasonable assurance opinion. It supports global consistency, reduces jurisdictional divergence and applies to general-purpose and certain special-purpose financial statements when the entity meets the criteria in Part A.
Effective date
The ISA for LCE is effective for periods beginning on or after 15 December 2025, with early adoption permitted and encouraged.
Overarching concepts in the isa for lce
The standard is standalone and self-contained; ISA requirements cannot be used to “top-up” circumstances not contemplated by the ISA for LCE. It delivers reasonable assurance using a principles-based, risk-based, proportionate approach. Its design emphasises clarity, outcome-orientation, intuitive structure, and use of core ISA concepts such as professional judgement, professional scepticism and materiality. It excludes complex matters unlikely to arise in typical LCE audits.
Structure and format of the isa for lce
The standard includes objectives, definitions, requirements and essential explanatory material (EEM). Ten Parts follow the audit flow from acceptance to reporting, supported by appendices. Requirements use “shall”, while EEM provides high-level context. Each Part includes objectives, requirements, communications and documentation subsections. Engagement-team-related requirements are separated for scalability when only an engagement partner performs the audit.
Similarities and differences compared to the isas
Both standards require a risk-based approach, sufficient appropriate evidence and compliance with ethical and quality-management requirements. They share concepts such as materiality, audit risk components and professional scepticism. Differences include: the ISA for LCE’s single-standard structure; exclusion of complex scenarios; reduced guidance; and more concise drafting. It cannot be used unless all criteria in Part A are met.
Maintenance
The IAASB will maintain alignment with revised ISAs, generally issuing ISA for LCE revisions one year later. A stability period of at least three years after 2025 applies, meaning no revisions will be effective before December 2028.
Transitioning
Auditors must assess appropriateness at acceptance and reassess after risk identification. Discovery of complexity or new information can require transition to ISAs mid-engagement. This requires revisiting terms of engagement, communications, planning, documentation and additional procedures. When different standards are used across periods, no explicit disclosure is required unless the auditor chooses an Other Matter paragraph.
Insights into the ISA for LCE
The standard does not prohibit auditors from referring to other guidance for understanding, but ISA requirements cannot be applied within an ISA for LCE engagement. The Preface outlines scope, public-sector considerations and the basis that firms apply ISQM 1. Part A explains eligibility criteria and use. Parts 1–10 provide requirements for concepts, evidence, quality, acceptance, planning, risk assessment, responses, concluding, reporting and group audits. Key insights include proportional documentation expectations, limited complexity in estimates, and clarity on fraud, internal control and IT environments in LCE contexts.
Adoption and implementation material available
The IAASB provides supplementary resources including a Basis for Conclusions, fact sheet, reporting and authority guidance, adoption guide, FAQs, an overview deck and video series covering objectives, applicability and design principles.
