Is IFAC's SME audit guide still reliable?
Whether a firm can still rely on IFAC's guide to using the ISAs in SME audits after ISA 315 and ISA 540 were revised, and which parts to re-check.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
On the shelf of many small and medium practices, physical or digital, sits IFAC's guide to using the International Standards on Auditing in audits of small and medium-sized entities. For years it has been the go-to text for training juniors and for building a methodology that fits owner-managed clients rather than listed groups.
It is still a valuable book. It is also older than two of the standards that matter most to an SME audit, and IFAC itself says so. This article explains what the guide covers, where it has fallen behind, and how to keep using it without carrying outdated requirements into the firm's files.
What the two volumes cover
IFAC describes the guide as being in two volumes. Volume 1 covers the fundamental concepts of a risk-based audit in conformance with the ISAs. Volume 2 contains practical guidance on performing SME audits, including an illustrative SME audit case study and a micro-entity audit case study. IFAC's page for the guide gives access to both volumes and carries IFAC's note about which standards it pre-dates.
The split suits a small practice well. Volume 1 explains why the audit is shaped as it is; Volume 2 shows what that looks like on a file for a business of the size most of these firms audit.
Why the fourth edition is out of step
IFAC states that the guide's fourth edition, dated July 2018, pre-dates ISA 540 (Revised) and ISA 315 (Revised 2019), and that content depending on the earlier versions of those standards should not be relied on without checking the current ones.
The dates explain why that matters. ISA 540 (Revised), on accounting estimates and related disclosures, is effective for audits of periods beginning on or after 15 December 2019. ISA 315 (Revised 2019), on identifying and assessing the risks of material misstatement, is effective for periods beginning on or after 15 December 2021. Both now apply to current audits under the IAASB's dates, and between them they shape the risk assessment and the work on estimates, which together drive much of an SME audit.
Smaller-entity guidance inside the ISAs themselves
ICAEW notes that ISA 200 requires the auditor to understand the entire text of each ISA, including its application and other explanatory material, and that this material also contains guidance specific to audits of smaller entities. In other words, the standards are not written only for large audits. Before turning to an older guide's interpretation of ISA 315 or ISA 540, read the current standard's own application material; where the two differ, the standard governs.
There is also a separate route for some clients. The IAASB's 2026 Handbook contains, in Volume 2, the International Standard on Auditing for Audits of Financial Statements of Less Complex Entities, the ISA for LCE. Whether it is available for a particular client depends on its local adoption and the entity's circumstances, so check with your regulator before planning to use it.
Which parts to re-check against current standards
Not everything in the guide is affected. A practical way to sort it:
- Re-check before relying on: anything on risk assessment, understanding the entity and its internal control, assessing inherent and control risk, and the case-study risk assessments; anything on accounting estimates, their risks and the auditor's responses.
- Read with care: material that cross-refers to those areas, such as linking assessed risks to further procedures, or completion steps that summarise the risk assessment.
- Generally still useful: explanations of the overall audit approach, engagement acceptance, planning concepts and documentation discipline, while confirming nothing else has changed since.
Whatever the category, the rule is the same: the standard's current text governs. For a companion that focuses on ISA 315 specifically, see using the ISA 315 first-time implementation guide.
Firm templates and Achekam's packs
Many firm methodologies were built from the IFAC guide, which means its age can be hidden inside templates nobody has opened for years. A methodology review that traces each risk assessment and estimates template back to the current standards will find any inherited wording.
In Achekam, a firm's partners keep the firm's own methodology and working-paper templates beside Achekam's platform methodology, which they can adopt, and a template version is published only by someone other than its author. Achekam also ships working-paper template packs written in its own words, covering audit areas, ISA for LCE, review and related-services engagements and others, for a firm to adopt and approve; the catalogue is marked as unapproved platform content until the firm adopts it. Neither the firm's templates nor Achekam's packs should be assumed current: whoever approves a template should check it against the standards in force. Firm methodology and templates covers the library and its approvals.
Training juniors with the case studies
The case studies remain one of the best training resources available to a small practice, because they show a whole audit of a realistic small business. Use them deliberately:
- Work through a case study's planning and risk assessment with the group.
- Then redo the risk assessment using the current ISA 315 (Revised 2019) and compare the two.
- Do the same for an accounting estimate using ISA 540 (Revised).
- Discuss what changed and why, and how the firm's own templates handle it.
That exercise teaches more than either the guide or the standards alone: trainees see the audit as a whole and learn how the standards have moved.
The guide earned its place on the shelf. Keep it there, labelled with the standards it pre-dates, and let the current text decide every question it raises.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
