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New ISA 315: Be Prepared for a Still More Complex Audit Model

By Prof Dr Michel De Wolf, DGST Réviseurs d’entreprises

With the consent of the Public Interest Oversight Board, the International Auditing and Assurance Standards Board (IAASB), at the end of 2019, approved a revised International Standard on Auditing: “Identifying and assessing the risks of material misstatement”. Remarkably, only 15 of its 18 present members carried an affirmative vote in favour of the new standard 1 (see footnote below).

Key Aspects of the New Standard

Indeed, some questions could arise around the design of a standard that, according to the offcial publication of its versions of 2012 and 2019, has grown, in seven years, from 51 to 115 pages.

Will all the auditors around the world really educate themselves, and adapt their audit programmes and tools, in order to implement this highly complex standard to all their audit jobs on financial statements of periods beginning 15 December 2021, or later?

While presenting its new baby, IAASB has stressed that the standard has been drafted with the objective of being scalable, in view of better taking into consideration the “less complex entities” (see the last issue of your practice group newsletter on this topic). I am afraid that the length of the standard is contradictory to that objective. Nevertheless, IAASB had to modernise the previous standard, for instance in order to cope to a more digitalised world than ever. Now, the document discloses additional application material, and two dedicated annexes, in order to better identify and assess the risks linked to IT environments, including possible alteration of financial data and software.

Around the use by the auditors of tools like data analytics, artificial intelligence, robotics, and even drones, IAASB was aware that many auditors are not well equipped with these tools. Therefore, the new standard remains not very prescriptive about the use of them.

ISA 315 (revised 2019) contains another interesting point. It explains what “professional scepticism” means in the field of identifying risks of material misstatement. The standard implies that the auditors would balance their search of evidence between corroborating elements and contradictory elements and take both fully into consideration in their final risk assessment.

All auditors have more or less two years to prepare themselves to implement the new standard.

1 There were in fact two negative votes and one abstention. The two negative votes came from a PwC person and a former Deloitte one. The latter, who serves currently as technical director of the Institute of Japanese auditors, was particularly severe about the new standard: “Ms. Kai explained that she voted against the standard because she does not believe that the Board and the ISA 315 Task Force has addressed the issue of complexity and understandability with the drafting approach in the final standard. Ms. Kai noted that several of the sentences in the requirements were very long, complex and not written in plain English. This drafting approach would also make it diffcult to translate to other languages especially where the language structure is different from English. In addition, application materials were very long, which made it diffcult for the readers to understand the whole picture of the standard. Therefore, it would likely impact the ability of users of the standard to properly implement the standard which would not be in the public interest” (minutes of the Board meeting).

Prof Dr Michel De Wolf

Prof Dr Michel De Wolf

GGI member firm
DGST Réviseurs d’entreprises
Advisory, Auditing and Accounting, Corporate Finance, Tax
Brussels, Namur, Verviers, Belgium
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DGST Réviseurs d’entreprises promises its clients to deliver accurate, independent, and effective advice. The core business of their audit services is statutory audits and assurance engagements. For DGST, auditing is not just about checking figures, but involves risk anticipation and enhanced risk awareness.

Prof Dr Michel De Wolf is an auditor, lawyer, and Honorary Chairman of the Belgian Institute of Auditors. He specialises in high-level tax advice, financial analysis, IAS/IFRS, company law and consolidation. He has proven experience as an auditor and advisor, particularly in various nonprofit organisations and public-sector entities. Prof Dr De Wolf is the current Chairman of CBCR/BOBR, the umbrella organisation for audit SMPs in Belgium. He is a member of the accounting standard setter in Belgium, and a parttime judge. He is also honorary Dean of the Louvain School of Management. Prof Dr De Wolf serves as Global Vice Chairperson of the GGI Auditing, Reporting & Compliance Practice Group.

Published: Auditing, Reporting & Compliance Newsletter, No. 03, Spring 2020 l Photo: Norbert Frommelt -


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