Nigerian audits that cannot use the ISA for LCE

Which Nigerian audits fall outside the ISA for LCE despite the FRC's adoption: listed and public interest entities, some groups, complex estimates.

By Achekam · 11 October 2026 · 4 min read · For Accountants & audit firms in Nigeria

When the Financial Reporting Council adopted the ISA for Less Complex Entities, many Nigerian firms looked at their client lists and saw a standard that might fit most of them. Some of those clients will not qualify, and the reasons are not always obvious from the size of the entity. A small company can be excluded by what it does; a modest group can be excluded by how it is audited.

This article goes through the exclusions one by one, so that a firm can screen its portfolio before promising anyone a lighter audit. It is a companion to the broader piece on the ISA for LCE in Nigeria and Kenya, which covers adoption and effective dates.

The adoption, and what it does not decide

The FRC published a notice adopting the ISA for Less Complex Entities on 28 July 2025. Adoption makes the standard available to Nigerian auditors. It does not make any given entity eligible: eligibility comes from the standard's own limits on its use, which ACCA summarises in its technical article on the audit of less complex entities.

A version note before relying on any of the wording below. The IAASB's 2026 Handbook page states that narrow-scope amendments resulting from the revised definitions of listed and public interest entities in the IESBA Code become effective in December 2026. Check the amended scope before relying on the "listed entity" wording for a period that falls after that change.

Listed entities and public interest characteristics

ACCA explains that the ISA for LCE cannot be used for the audit of a listed entity. Nor can it be used for an entity with public interest characteristics, such as a financial institution or a provider of insurance.

The second exclusion is the one that needs judgement. An entity does not need to be large to have public interest characteristics; what it does matters more than its turnover. A small microfinance lender or a small insurer is excluded on that basis, however simple its books.

Groups with component auditors

Group audits bring their own limits. ACCA explains that the ISA for LCE cannot be used for a group audit where any group company is listed or has public interest characteristics, or where component auditors are involved. There is one carve-out: where a component auditor's involvement is limited to a physical presence needed for a specific procedure, such as attending the inventory count.

In practice, this means a modest group with a subsidiary audited by another firm is outside the standard, while a group whose only outside help is someone attending a stock count in another city may still be inside it. The planning file should say which applies, and why.

Complex estimates and larger finance functions

Two further tests look at the entity's accounting rather than its status.

ACCA explains that the standard should not be used where the entity has accounting estimates that rely on complex techniques, assumptions or data. An entity with a significant fair value measurement built on a model, or a provision that depends on actuarial assumptions, is likely to fail this test even if everything else about it is simple.

ACCA also explains that a less complex entity should have a centralised finance function with few employees involved in financial reporting, the standard suggesting five individuals or fewer. A business with finance teams spread across several sites is unlikely to fit, whatever its size.

Quantitative thresholds a jurisdiction may set

ACCA explains that the ISA for LCE suggests each jurisdiction should also set quantitative thresholds, such as revenue, assets or employee numbers, to help determine which entities the standard can be used for.

At the time of writing, this article does not rely on any Nigerian threshold having been set. A firm should check the FRC's adoption notice and any later pronouncement for thresholds before finalising its screening, and should record in its own policy what it has found.

Achekam's documented assessment and partner decision

On a Nigerian engagement, Achekam's engagement page shows an Audit Control Tower covering entity classification, whether company law requires an audit, the ISA for LCE, an acceptance checklist, regulatory confirmations and sector checklists. The ISA for LCE decision sits there, next to the classification it depends on.

Achekam lets a Nigerian audit use the ISA for LCE only after a documented partner assessment, and it uses the IAASB's effective date because the FRC set none. The assessment is the place to work through each exclusion above against the actual client. A useful screening table for that assessment:

The acceptance checklist in the Control Tower must also be approved by a partner other than its preparer before the audit report can be approved, which gives the screening a second pair of eyes.

Screening the portfolio

Run the table across every audit client before the next engagement letters go out, not one client at a time as each audit starts. Clients who fail a test should hear early that their audit will follow the full ISAs, with the reason. For the standards framework the screening sits within, see auditing and quality standards in Nigeria and Kenya.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.