Syllabus D. Audit Evidence D2. Audit procedures

D2d. Smaller Entity Evidence 4 / 5

Syllabus D2d)

Describe why smaller entities may have different control environments and describe the types of evidence likely to be available in smaller entities.

Smaller entities have fewer internal controls

Problems will include:

  • Segregation of duties often lacking due to not enough staff

  • Owners often dominate all major aspects of the business

  • When expanding - management focus on this and not on controls

  • Record keeping and documentation of systems and controls may be informal or inadequate