ISA for LCE: the same reasonable assurance
Whether an audit under the ISA for LCE gives a Nigerian client less assurance than a full ISA audit, and how a firm explains and records the choice.
By Achekam · · 4 min read · For Accountants & audit firms in Nigeria
A client's banker hears that the company's next audit will be done under "the ISA for LCE" and asks a fair question: is that a lesser audit? The client's directors ask the same thing in a different way: if the standard is simpler, should the fee be lower and the opinion worth less?
The short answer, on the standard-setter's own account, is that the level of assurance does not change. What changes is the standard the auditor works from. This article sets out what the IAASB and ACCA say about that, how a firm can explain it to a client and its lenders, and how the choice is recorded in Achekam for a Nigerian audit.
A standalone standard built on the ISAs
The IAASB describes the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities as a standalone global auditing standard designed specifically for smaller and less complex businesses and organisations. It also states that the ISA for LCE is built on the foundation of the International Standards on Auditing.
ACCA's account is consistent. It explains that the IAASB has issued the ISA for LCE as a standalone auditing standard containing all the requirements needed for the auditor to obtain reasonable assurance that the financial statements of a less complex entity are free from material misstatement.
"Standalone" is the operative word. An auditor working under the ISA for LCE works from that one standard rather than moving between the full suite of ISAs. That is a difference in how the requirements are organised and written for this kind of entity, not a reduction in what the audit is meant to achieve.
Reasonable assurance, as in a full ISA audit
The IAASB states that audits performed using the ISA for LCE provide the same level of assurance for eligible audits: reasonable assurance. Its page on the ISA for LCE is the authoritative place to read that statement in context.
Two words in that sentence carry weight. "Same" answers the banker: the opinion is a reasonable assurance opinion, as it would be under the full ISAs. "Eligible" is the condition: the statement holds for audits that qualify for the standard. An audit of an entity outside its scope is not made eligible by choosing it. The limits on scope are covered in Nigerian audits that cannot use the ISA for LCE.
Adopted in Nigeria, used by decision
ACCA explains that the required or permitted use of the ISA for LCE is decided by individual jurisdictions, and that the standard should only be used once it has been formally adopted, and the scope of its use confirmed, by the relevant regulatory or standard-setting authority. In Nigeria, the FRC has adopted it; the background is in the ISA for LCE in Nigeria and Kenya.
Adoption is a permission, not an instruction. For each client, the firm still decides whether the standard fits and records why.
Explaining the choice to the client
Clients and their lenders deserve a plain explanation, ideally in the engagement letter and repeated at the planning meeting:
- the audit gives reasonable assurance, the same level as a full ISA audit, on the IAASB's own statement;
- the firm has assessed the entity as eligible, and will revisit that assessment if the facts change during the audit;
- the engagement letter names the standard the firm will use, so there is no surprise when the report arrives.
On fees, be careful not to promise what the facts do not support. A standard written for less complex entities may suit the client's circumstances well, but the work the firm does still has to support a reasonable assurance opinion. Price the engagement on the work, not on the name of the standard. A client told that the new standard means a cheaper audit will feel misled when the team still asks for all the evidence a reasonable assurance opinion needs.
| Question from the client or lender | Answer |
|---|---|
| Is this a lesser audit? | No: the IAASB states the same level of assurance, reasonable assurance, for eligible audits |
| Why use it? | The firm has assessed the entity as less complex and eligible |
| Can it be used for any client? | Only where the entity is eligible and the jurisdiction has adopted it |
| What if the facts change? | The firm reassesses and records the decision |
Achekam's LCE working-paper pack and decision step
Achekam lets a Nigerian audit use the ISA for LCE only after a documented partner assessment, using the IAASB's effective date because the FRC set none. That assessment is the record a firm would point to if a lender or a reviewer asked why the standard was chosen: it shows the entity was considered, the decision was made by a partner, and when.
Achekam also ships working-paper template packs written in its own words, including one for the ISA for LCE, for a firm to adopt and approve. The catalogue is marked as unapproved platform content until the firm adopts it, and whether it installed on a particular deployment was not checked. A partner should therefore review the LCE pack against the standard before the first engagement relies on it, and record that review.
Moving back to the full ISAs
An eligibility decision made at planning can turn out wrong. A complex estimate surfaces, a component auditor becomes necessary, or the entity's business changes. When that happens, the honest course is to revisit the documented assessment, record the new decision and the reason, and tell the client. The level of assurance the client receives does not change either way; what changes is the standard the work is performed under, and the file should show when and why.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
