Audit of small entities/company

The main area of this topic discuss on the audit of small entities which concern on:

• Day-to-day of Owner-managers
• Few sources of income and uncomplete activities
• Simple record keeping(fewer ledgers,daybooks)
  
• Limited Internal control

Common ownership and management:

1. Existence of owner-manager actively involved in the day-to-day running of the business.
2. Audit risk increases as both easily override any internal control.
3. However; audit risk might be decrease as presence day-to-day substitute to formal internal control.
4. Risk assessment based on auditors knowledge of integrity and competencies of owner-manger.
5. Small entities have more going concern problem as they often vulnerable to cash flow problem, in addition bad debts.
6. Related parties:Owner-manager confuse business affair with own affair.