Review of SMEs Auditing in the UK and the US

Abstract

　There is a problem of how to guarantee the reliability of financial statements in small and medium-sized enterprise (SMEs) accounting (Kawasaki 2016;2017). This paper deals with cases in the UK and the US. We outline the situation and auditing of SMEs in both countries. We also consider the situation of accounting professionals who provide services to SMEs.

　As a result, we believe that SMEs in the UK and US account for the majority of economic activity. Regarding the auditing of SMEs, although small companies in the UK are excluded from this process, auditing is generally mandated by the Companies Act 2006, and the general-purpose financial statements a company is required to produce.

　In the US, companies other than registered companies do not need to comply with the accounting standards published by the Financial Accounting Standards Board (FASB) unless they are audited. Among the small companies, “Financial Reporting Framework for SMEs” (FRF for SMEs) and “Other Comprehensive Basis of Accounting financial statements” (OCBOA) are applied. The financial statements based on these standards are referred to as financial statements of special purpose. In order to ensure the reliability of financial statements, reviews and audits are conducted based on AU-C800 (AS3305).

　There is much opposition to the introduction of compulsory auditing of SMEs. However, in order to ensure the reliability of accounting information of SMEs, accounting professionals also provide services to SMEs in various forms other than auditing.