Audit Strategy for Small Business
Updated with conforming changes as of October 1, 2009, this new Guide provides authoritative and comprehensive guidance on the risk-based audit process that is required on all financial statement audits.
February 22, 2010
The audit strategies used on larger companies may not be practical for audits of a small business. Big businesses can rely on their own personnel, including their own internal auditors, to provide assistance. But auditors of a small business might need to adjust their audit strategy.
Auditors of a small business may encounter certain challenges that affect their audit strategy, such as:
The unique demands of a small business audit typically require significant involvement of the most experienced auditors during the audit planning process. More experienced auditors will be able to make important judgments about audit strategy, including:
Small businesses face certain challenges in implementing effective internal control, particularly if management of the business views internal control as something to be “added on” rather than integrated with core processes. These challenges to implementing effective internal control include:
Companies should implement a control structure to reduce risk to an acceptable level. Sometimes, smaller companies do not perceive that they have sufficient resources to fully implement segregation of duties or other controls that are more preventive in nature. Thus, smaller businesses may rely more on detective rather than preventive monitoring and personal involvement by top management in setting a control environment that brings in sufficient competence and trust to assist in reducing risk. All companies, regardless of size, need to have all components present and functioning, but the relative reliance on each component may be different in smaller companies than it is in larger companies.
Adapted from the AICPA Audit Guide, Assessing and Responding to Audit Risk in a Financial Statement Audit. This paperback, published by the AICPA, is available at cpa2biz.com, order product # 012459.