It may feel as if changes to the auditor’s risk identification and assessment processes have been shimmering just beyond the horizon for some time, along with the practical challenges of making the transition to the revised International Standard on Auditing (ISA) 315 Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and Its Environment and the UK version.

The International Auditing and Assurance Standards Board published its revised ISA 315 in December 2019, along with an introduction and other useful material. The Financial Reporting Council followed with ISA (UK) 315 (Revised July 2020).

Both these revised ISAs are effective for all audits of financial statements for periods beginning on or after 15 December 2021 (with early adoption permitted). Generally, this effective date will mean audits from 31 December 2022 onwards, which promises a busy year for auditors, as firms will need to plan and prepare for ISA 315 while they are also getting ready for new quality management standards.

Do not underestimate the time and effort associated with changes to methodology, software, training and so on.

“It’s not easy to read between the revised and the old standard and see what’s changed,” says Jeffrey Barnes, Manager, ICAEW Quality Assurance (QAD). As he adds: “ISA 315 has been completely rewritten.”

For this and other reasons, a thorough reading of the revised ISA 315 and or ISA (UK) 315 (as appropriate) is a good idea. They both include application material that firms may find useful. For example, as there is a lot more on technology in the revised standard, some firms will welcome the content of Appendix 5 Considerations for Understanding Information Technology (IT) and Appendix 6 Considerations for Understanding General IT Controls. Firms will need to understand the fundamental concepts of inherent risks and the inherent risk spectrum as well.

Since ISA 315 was revised, the faculty and other parts of ICAEW have kept the revised ISA 315 and the need to prepare on the radar of auditors, with articles, webinars and other resources. Firms may benefit from revisiting them. To recap, they include:

• Revised ISA 315 for 2022 audits: a brief bullet-point guide to the main areas of revision, with pointers to some other ISA 315 resources;
• Key steps for implementing the new requirements: tips on putting enhancements in the revised ISA 315 into practice;
• ISA 315 implementation tips: approaches to implementation, from getting started to addressing challenges; and
• A new approach to risk assessment: why all audit firms need to be thinking about risk differently.

Other resources to assist with ISA 315 implementation will become available from ICAEW during 2022.