The audit approach in start-up and established companies : a comparative study

Abstract

PURPOSE: This study aims to compare the audit approach applied to start-ups and established companies. The influence of client size on the audit approach is analysed, whilst contrasting the characteristics and differences between start-ups and established companies, respective of their audit approach. DESIGN: A qualitative approach was implemented with the goal of achieving the research objectives. Fifteen interviews were held with Big 4, networked and nonnetworked audit firms. with External Assessors of the Internal Audit Units, Heads of Internal Audit of public listed FINDINGS: Interviews suggested that start-ups experience a substantive approach, whilst established companies are more susceptible to a controls-based approach. Auditors determined that the audit process is the same for all clients, however, areas such as understanding the company, materiality, going concern and research and development were identified to be approached differently in a start-up. Findings determine that no track record, lack of historical data, innovation, and financing difficulties are synonymous with start-ups, undoubtably influencing the audit approach. in Malta, awareness about IIA Standard 1312 is viable CONCLUSION: This study concludes that auditing does not vary according to whether the client is a start-up or an established company since all companies must adhere to auditing standards. It was determined that the audit approach varies for start-ups, as a substantive approach was found to be more common, whilst reliance on controls is more present in an established company. VALUE: This study aspires to raise awareness on the nature of start-ups and to highlight how contrasting start-ups and established companies can prove to be beneficial for business owners, audit firms and authorities. Literature will benefit from this study as client size is analysed from a different perspective.