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Classifying entities

Recent changes to Ethical and Auditing standards have introduced different entity classes. David Isherwood and Rupak Vasishta outline their characteristics and key impacts.

One of the more confusing aspects of the recent European Union (EU) audit reforms and the subsequent introduction of the Financial Reporting Council (FRC) Revised Ethical Standard 2016 (see Standards and support box) has been the introduction of different classes of entity. Previously, Ethical and Auditing standards incorporated the relatively simple dichotomy of listed entities and other. The new standards require the auditor to distinguish between Public Interest Entities (PIEs), Other Listed Entities, SME Listed Entities, and none of the above; all of which have different implications for the conduct of the audit and the relationship with the audited client.

This article is no substitute for being familiar with the underlying standards. However, it will help you understand the characteristics of each entity and provide insight into some of the key impacts.

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