- 15 Marks
AAA – May 2022 – L3 – Q5 – Regulatory Framework and Professional Standards
Discuss arguments for and against audit exemption for small companies and evaluate considerations for auditing small entities.
Question
The Companies and Allied Matters Act, 2020 has classifications and responsibilities for various types of companies incorporated under it. A particular class that has received more attention in recent times and in the Act is small companies.
Your audit team has been approached by a few of these small companies for guidance on the issue and your team has been assigned this responsibility. Part of the concerns of your firm is whether or not those small companies merit the concerns of regulatory authorities and the accounting firms that have to be responsible for their audit.
Your team has a number of young assistants who are yet to understand the differences and therefore need enlightenment on this as part of the training programs.
Required:
a. Discuss the arguments for and against the exemption of small companies from audit. (10 Marks)
b. On the basis that an audit may be conducted for a small entity, evaluate the points the auditors would consider. (5 Marks)
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