User perceptions of the small statutory audit : an analysis

Abstract

Purpose – The purpose of this study is to assess user perceptions of the small statutory audit; namely company directors, banks and the Inland Revenue Departments as well as individual from a business representative organisation as an interested party to the product. The study also analyses the potential of a voluntary audit and other alternative forms of assurance to the statutory audit. Design – A mixed methodology approach was used to address the research objectives. A questionnaire was distributed to company directors which enabled the researcher to reach a larger number of participants. Semi-structured interviews were set up with the other users and the business representative. Findings – The study revealed that company directors perceive an audit as adding value to companies. Nonetheless, the smaller companies think that an audit is a burden on the company and would prefer a less complex form of assurance. Results indicated that a voluntary audit is more likely to be opted for by companies larger in size. Additionally, whilst a compilation engagement was not accepted due to its lack of assurance, a review engagement was preferred by many since it still provides assurance on financial statements of companies. Conclusions – Results indicated that a set of audited financial statements is of utmost importance to certain stakeholders, especially bankers. It was also revealed that an audit provides certain benefits to a company that would otherwise not be attained, which is one factor that affects the option to choose voluntary auditing. It seems that a form of assurance should always be provided by companies, but the level of assurance should perhaps be determined in accordance to the size of the company. Value – This study raises awareness the importance of an audit of financial statements, and the burden it imposes on certain companies. In light of this, it is perhaps important for the accountancy profession to consider the varying needs of all companies in order to accommodate these needs accordingly.