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What Are International Auditing Standards and Why Do They Matter?

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Leaman Crews - Guest Contributor

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Learn how your business can benefit by complying with international auditing standards.

The International Standard on Auditing (ISA) is a framework of standards recognized worldwide by auditors, CPAs, accounting teachers and students, and more. Informally known as ISAs, these standards ensure auditing financial statements is done consistently and transparently.

So what is ISA, and why should you care about international auditing standards? Businesses of all sizes gain credibility in the eyes of banks, investors, and external stakeholders when you follow the ISAs.

Even as a small or midsize business owner, if you have cross-border operations of any sort, adhering to the ISAs ensures your financial reporting is consistent. Following ISA guidelines may even be required by law in other countries where you do business.

What are international auditing standards?

The ISAs are auditing guidelines developed by the International Auditing and Assurance Standards Board (IAASB), an independent standards organization founded in 1978.[1] The IAASB designed the ISAs to apply to all organizations, regardless of their type, size, or global location. As such, the ISAs quickly emerged as the worldwide standard for international audits.

While the ISAs are recognized as international auditing standards in nearly every country, they are actually the law in some jurisdictions. For example, the European Union Audit Directive passed in 2006 enforces the use of the International Standards on Auditing for all statutory audits in the EU.[2]

Who sets international auditing standards?

The IAASB sets and updates the ISAs as needed based on feedback from auditors and companies that follow the standards. The updates help address emerging trends and issues found in global finance, keeping the ISAs relevant to modern standards. 

What are the different types of international auditing standards?

While the ISAs are the general standard across the globe, some countries follow additional standards that may result in procedural differences from the ISAs. For instance, in the United States, the Auditing Standards Board (ASB) and Public Company Accounting Oversight Board (PCAOB) develop guidelines that are incorporated into the U.S.'s generally accepted accounting principles (GAAP).

The differences between the ISAs and GAAP concern documentation of audit procedures, and risk assessment. Under GAAP and PCAOB standards, auditors are required to obtain an engagement letter before starting audit work.[3] This requirement is not in the ISAs. However, the ISAs require auditors to obtain a more thorough understanding of the audited entity's business and strategic risks before starting an audit engagement.[4]

Why are international auditing standards important?

Having a set of international standards for auditing is necessary so that the quality and credibility of audits performed worldwide are the same. Financial statements from different countries are generally interoperable, thanks to international standards like the ISAs. Without the ISAs or similar guidelines, there would be little trust in the accuracy of financial statements worldwide.

Following the ISAs tells customers, suppliers, and other stakeholders that your business has excellent governance and risk management standards For small and midsize businesses, adherence to international audit standards can lead to higher valuations, thanks to the legitimacy they add to your financial reporting. This, in turn, can lead to business growth and expansion.

Knowledge of the ISAs is also required for students in a variety of settings. For example, the CPA exam in the United States requires you to have a solid working knowledge of the ISAs and how they are used to audit international standards. Audit software is usually designed to follow the ISA standards.

What are the benefits of complying with international auditing standards?

Compliance with international auditing standards is important for any organization that has audits performed on its financial statements. By complying with the ISAs, an organization is seen as more credible by investors, creditors, and stakeholders. Outside observers can have confidence that the organization is committed to accuracy in their financial statements and transparency in their business operations.

An organization's business practices also improve by following the ISAs. Decisions are regularly made in response to audit recommendations, so following an internationally accepted set of standards, any actions taken are based on solid reasoning. An ISA audit also reduces the risk of fraud since the audit guidelines are comprehensive and thorough. With a successful ISA audit, even the smallest businesses show that they have a commitment to strong management and transparent financial reporting.

   What are the consequences of non-compliance with international auditing standards?

Depending on an organization's location, non-compliance with the ISAs could violate the law, like in EU countries where the EU Audit Directive is in force. Even without a legal requirement, a company might suffer reputational damage by not following the ISA standards. Investors and other external stakeholders may question the validity of financial statements and audit reports if the company doesn't follow known standards.

How are the international auditing standards structured?

The ISAs are divided into 36 different standards, which are grouped into six categories, as defined by IAASB’s 2021 handbook.[5]

  1. General Principles

  2. Risk Assessment and Response

  3. Audit Evidence

  4. Using the Works of Others

  5. Conclusions and Reporting

  6. Specialized Areas

Each ISA follows this uniform entry style:

  • Introduction

  • Objective

  • Definitions

  • Requirements

  • Application and other explanatory material

Following this structured approach ensures that the purpose of each standard is well understood and that auditors work within a standard framework.

How do I ensure that my audit complies with international auditing standards?

Applying each of the 36 ISAs to an audit will help ensure that international auditing standards are met. Documenting the findings that apply to each category and standard will show compliance with the ISAs and give legitimacy to the final audit report. Investors and other external stakeholders will look for ISA compliance before looking at a company's financial statements or audit report.

Organizations that strive to meet international auditing standards should also learn the International Financial Reporting Standards (IFRS).[6] The ISAs and IFRS are sometimes confused, but they serve two different (if related) functions. Instead of audit standards, IFRS is a set of accounting standards for preparing financial statements. Much as the ISAs provide a set of guidelines for audits, IFRS offers a standard structure for financial reports.

Following IFRS guidelines helps ensure financial transparency and the compatibility of financial reports across different global jurisdictions. Following the IFRS set of standards provides another layer of consistency that inspires confidence in the auditors that practice under the ISAs.

Tools to use for auditing


Audit software can help your business adhere to IAS and other accounting standards. Check out Capterra's directory of top-rated audit software or read Capterra's buyers guide for audit software to learn more about what these tools can do for your financial team.



Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.

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About the Author

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Leaman Crews is a freelance writer and technology consultant specializing in finance, HR, and enterprise IT. A former newspaper publisher and editor, his work has appeared in publications across the United States.

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