The International Accounting and Assurance Standards Board has released a revised standard for identifying and assessing the risks of material misstatements.

International Standard on Auditing (ISA) 315 (Revised 2019) is part of the IAASB’s work to improve audit quality globally. In finalizing the revisions, the IAASB concentrated on making the standard more understandable and less complex and lengthy. It also made improvements and clarifications to provide for a more consistent and robust risk assessment, which forms the foundation of the auditor’s efforts to elicit enough relevant audit evidence. The changes also modernize the standard to reflect the evolving environment in which businesses operate, especially in terms of technology, and focus on why procedures are required.

“This revised standard is the second significant standard to be completed in our efforts to enhance audit quality,” said IAASB Chair Tom Seidenstein in a statement last week. “ISA 315 (Revised 2019) is foundational to the audit — the core of the audit is undertaking work to obtain sufficient appropriate audit evidence to address the risks of material misstatement, and the changes made to ISA 315 (Revised 2019) recognize the importance of a robust and consistent risk assessment in driving an appropriate and effective response to those risks.”

ISA 315 (Revised 2019) takes effect for financial statement audits for periods starting on or after Dec. 15, 2021.

Because of the importance of the revised standard, the IAASB — which is affiliated with the International Federation of Accountants — has some activities in the works to support effective and consistent application of the changes. An implementation plan has been developed describing the planned activities and estimated timing.

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