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Technical Resource
This webpage contains pronouncements, guides and articles that are relevant to The Hong Kong Standard on Auditing for Audits of Financial Statements of Less Complex Entities (HKSA for LCE).
Effective Date
The standard is effective for audits of financial statements of less complex entities for periods beginning on or after 15 December 2025.
Introduction
Adopted from the International Auditing and Assurance Standards Board's (IAASB) The International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE), the HKSA for LCE is tailored to meet the specific audit needs of smaller and less complex businesses and organizations. The Authority of the standard in Part A sets out the intended scope of the HKSA for LCE. Limitations for using the standard are designated into three categories. In determining the appropriate use of the HKSA for LCE, all three categories are to be considered:
- Specific classes of entities for which the use of the HKSA for LCE is prohibited (i.e., specific prohibitions);
- Qualitative characteristics that describe a less complex entity, and if not exhibited by an entity would ordinarily preclude the use of the HKSA for LCE for the audit of the financial statements of that entity; and
- Quantitative thresholds to be determined by legislative or regulatory authorities or relevant local bodies with standard-setting authority in each jurisdiction.
To ensure the appropriate application of the HKSA for LCE, the Institute’s Auditing and Assurance Standards Committee (AASC) has modified the Authority of the ISA for LCE to better align with Hong Kong’s circumstances by:
- Adding or modifying the classes of entities prohibited from using the HKSA for LCE under paragraph A.1.(c).
- Establishing quantitative thresholds in paragraph A.4. of the HKSA for LCE.
The Basis for Conclusions summarizes the considerations of the AASC in making these local modifications. It also discusses the mandatory disclosure requirements for the auditor’s name and practising certificate number in the auditor’s report for audits conducted under the HKSA for LCE, along with an impact analysis of key areas that auditors should be aware of when applying the HKSA for LCE in audit engagements.
Click below for more information:
The Institute
IAASB
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