Hello,

Can any one offer guidance on assessing the risk and testing internal control for start up companies.  The companies that I audit regularly are very small - usually one owner employee and an admin.  There are hardly any assets - just cash and usually credit card debt.  These companies have usually little income or a net loss.  I have subscribed to PPC however, all of their programs tend to be for large corporations.  I tend to feel like I am over auditing and wanted to know if anyone has run into this type of situation.

Thanks

I, too am a cpa who performs small audits.  Our job as auditors is to test the controls that the organization has in place.  From your post it seems that the companies you audit may have minimal or no controls.  That is okay.  You just need to document that no controls exist and increase your risk levels to high.  This will produce larger sample sizes when you test substantively.  Documentation is the key!!!

Hope this helps.

Hi mbradfordk,

Thanks you kindly for your response.  You are actually the first person that I have been in contact with that performs small audits as I do.  Could you give me an idea of the type of test you perform on such engagements and the type of documentation you keep.  Do you use any specific guidance or special audit programs?

Thanks again for your response.

Charlene

I have a questions for the both of you. How many years were you doing (work experience with a firm etc..) audits before you felt comfortable enough to take on the task of perfoming small audits.

Thanks in advance

The substantive tests would be the same as large audits (i.e. cash recons, search for unrecorded liabilities, fixed asset additions, etc.)  The difference is, because you cannot rely on the controls of these companies, the ROSM must be placed at high.  This will lead to larger sample sizes.  The documentation would be an excel spreadsheet illustrating the sampled items you reviewed and a memo with a purpose, procedures, and conclusion. 

I worked at KPMG for 4 years prior to joining the smaller firm where I am now.  Small audits are actually easier (in my opinion) than larger ones because there is not as much activity and the accounting is not as complex.  if you can audit a large company, you can audit a small one.