Following major revisions to the International Standard on Auditing (UK) 315 (Revised July 2020) (“ISA 315”), the landscape for auditing practices have evolved, urging our audit team at PKF Smith Cooper to re-evaluate and update our audit methodologies to ensure we remain compliant.
The background
What is ISA 315?
ISA 315 provides all audit firms with a set of requirements that must be met when identifying and assessing the risks of material misstatement. This standard helps form the foundation of our auditing process. The revisions to ISA 315 intend to establish a robust and enhanced set of requirements to ensure clarity and consistency across the audit profession, in addition to driving a more collective response to identified risks. The last major revision of this magnitude was in 2003.
Effective for accounting periods commencing on or after 15th December 2021, the key changes include:
- Significantly increased requirements on the level of documentation to support audit risk assessment conclusions
- Further emphasis on understanding and evaluating client’s internal financial systems and processes, regardless of whether auditors are relying on internal controls
- Greater depth to audit risk assessment processes at the planning stage and throughout the audit engagement
- Considerable focus on how auditors review client’s IT environment, requiring an in-depth understanding and evaluation of client’s IT infrastructure to effectively assess digital-related risks.
How we’ve adapted
Due to the scale of the revisions, the implementation of ISA 315 presented various practical challenges and involved a significant rethink of our auditing approach to maintain compliance with UK auditing standards.
The following are some of the measures our auditing department has undertaken:
- Our technical team have spent considerable time interpreting the new guidance and implementing new systems, processes, and templates to support the team. This will ensure we continue to provide a robust and fully compliant audit.
- Taking the opportunity to re-train all of our team, from junior through to partner, on key auditing principles to provide greater depth to their understanding, and to provide guidance on the new audit requirements.
- Significant investment in training relating to the IT-related aspects of ISA 315, as this is a new and key area of focus.
- Utilising our PKF network membership to collaborate with other network firms in the UK and worldwide on training and technical interpretation.
The results
In light of the revisions to ISA 315, there has been a clear opportunity to review our auditing processes and identify areas for improvement to ensure we continue to provide clients with a high-quality audit.
Having a deeper understanding of our client’s businesses has enabled us to gain greater insight into the potential risks that they are exposed to. This allows us to continue to communicate relevant, appropriate, and timely feedback on clients’ internal systems and processes.
Furthermore, the greater emphasis on understanding client IT environment and infrastructure allows for the identification of potential business risks affecting our clients.
As a result of our continued investment in training and the strength of our PKF network membership, we are able to maintain a high level of audit compliance and quality.
Speaking on the changes made within the auditing team, Barbara Sims, Audit Director at PKF Smith Cooper, commented: ‘Although the revisions to ISA 315 provided some much-needed clarity from the regulators on how they require audit firms to approach the risk assessment process, it has also presented significant practical implications.’
Barbara added: ‘Thanks to the technical support from our sister company, Infuse, and the collaboration with PKF network firms, we have been able to manoeuvre through the implementation process without impacting the quality of our auditing services.’
As a firm, I am proud of the way in which we have managed to successfully navigate our way through these challenges, updated our audit methodology and impart the changes effectively to our audit team by providing valuable training sessions across the department. But perhaps most importantly, also how positively our teams have embraced those changes, which has further enhanced the quality of the training that we provide.
Barbara Sims, Audit Director, PKF Smith Cooper
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