What Scaled Audit Execution Is About
Generally speaking, the considerations relating to scaled audit execution apply to all types of annual audit (…), irrespective of e.g. the legal form or size of the subject of the audit, and are therefore not restricted to SMEs. (…) the type, scope, and documentation of the audit execution are determined by the size, complexity, and risk entailed by the subject of the audit.
A scaled audit execution is an audit execution whose type, scope, and documentation is determined by the size, complexity, and risk entailed by the subject of the audit. However, both the audit quality and the reliability of the audit opinion must be consistent throughout all annual audits.
This means that if the objective is consistent for all annual audits, the path to achieving it may vary according to differences in the size, complexity, and risk entailed by each audit subject. This path, i.e. defining the type and scope of audit execution and its documentation as well as implementing the same, is to be laid out by the professional with due regard to his/her personal responsibility and subject to sound professional judgement. Scaled audit execution is not a new concept and was first introduced with the ISA (International Standards on Auditing). Even conventional audit execution qualifies for scalability pursuant to the IDW auditing standards (e.g. IDW PS 200 Item 18 et seq.; IDW PS 240 Item 12; IDW PS 261 Item 74 et seq.).
The type and scope of audit execution particularly refers to the definition of materialities, the predefinition of the type and number of audit activities, the scope of audit evidences as well as the introduction of random sampling and techniques thereof.
Complexity and risk relate primarily to the risk of a materially false representation in the annual report to be audited; this risk is of course also derived from the risk of doing business, the complexity of business transactions carried out, and the client’s accounting practices. It follows that this WPK statement is with reference to the risk-oriented audit approach laid out in the ISA Articles 315 and 330.
Subject of the audit relates to the auditing mandate in its entirety as well as individual areas of inquiry. Consequently, a distinction must be made between mandate-related risks and risks related to the area of inquiry.
Source: Note Regarding Scaled Audit Execution Pursuant to The ISA as at Dec. 31st, 2011