Small company audit for specific third parties as an alternative to current statutory requirements

Abstract

Purpose: The main objectives of this dissertation were to assess the current perceptions of both the banks and the Inland Revenue Department with respect to the existing statutory audit for small companies in Malta and to ascertain the need for and the appropriate nature of each specific audit as perceived by the relevant parties. Design: The objectives of this study were achieved by conducting eleven interviews with three different commercial banks' employees, and three interviews with Revenue Officers at the Inland Revenue Department. Findings: The study found that both the banks and the Inland Revenue Department agree that an audit adds credibility to the financial statements of a small company and serves as a form of assurance on such statements. However, they do understand that the benefits that arise from conducting the statutory audit could be less for small companies. Moreover, they expressed the need that a form of independent assurance must be present in the financial statements of such companies. As a result, respondents were prepared to consider the small company audits for specific third parties as an alternative to the statutory audit requirement. Value: This study recommends the introduction of small company audits for specific third parties instead of the statutory audit requirement. Moreover, the study also suggests that the auditors should dedicate enough effort to ensure that the relevant third parties understand better the possible alternatives to the statutory audit.