The International Standards on Auditing issued by the International Auditing and Assurance Standards Board are sets of high-quality standards to be used globally to ensure high-quality audits of financial reports. Although widely accepted and used, the ISAs have been criticised for their complexity in their application on audits of SMEs/LCEs. This leads to unnecessary amounts of work being done leading to increased audit costs for LCEs, which leads to a perceived loss of cost/benefit ratio for such smaller firms. In 2019, the IAASB published a Discussion Paper to better understand these problems and find a possible solution that would benefit all parts.

The focus of this research is on identifying and analysing the arguments put forward by actors engaged in the development of proposed ISAs for LCEs. The arguments in the comment letters are identified, reviewed, and analysed to better understand the important factors in audits with focus on LCEs. Based on analysis of empirical literature and analysis of the comment letters using content-analysis procedures, this study examines the arguments put forward through the lens of established definitions regarding audit, audit quality, audit in small firms and the audit process.

By examining 91 comment letters and analysing the arguments with the use of the literature analysis, this study concludes that there is an urgent need for a solution for audits of LCEs. The focus of IAASB should be on a solution for audits of LCEs that does not compromise the quality of the audits, while satisfying the needs of LCEs at the same time by simplifying the audit process. While revising current ISAs might be a sufficient solution, the time it would take to execute this plan is believed to be too long. On the other hand, while the respondents believe that a separate standard would be a plausible solution, there are fears of a decreased audit quality for audits conducted according to the new standards.