Audit regulation for small companies – a comparative European study

Purpose Although small companies are crucial to the European economy, the International Standards on Auditing (ISA) focus on complex, capital market-oriented companies, which can pose challenges to small companies. Addressing this, the International Auditing and Assurance Standards Board issued the International Standard on Auditing for Less Complex Entities (ISA for LCE). This study aims to provide a comprehensive comparative analysis of the audit regulation in the European Union (EU). Design/methodology/approach The research design is mainly qualitative, as the authors delineate the terms “SME” and “LCE” and present a comparison of the requirements for statutory audits in the EU member states. The main section is rather normative, as the study provides a concise EU-wide comparative analysis of all national auditing standards for small companies and the ISA for LCE. Findings Firstly, the definitions of “SME” and “LCE” are not clarified yet. Furthermore, only Belgium, France and Germany have developed own auditing standards for small companies. The authors find similarities and differences between these standards in the areas of risk identification and assessment, the reactions to the identified risks and the documentation and reporting of these risks. Originality/value To the best of the authors’ knowledge, this study is the first to provide a comprehensive comparative analysis of all national auditing standards for small companies and the ISA for LCE in the EU and therefore lays a foundation for future research and policymaking in the area of auditing standards for small companies.