Financial Statements Audit and Simplified Accounting for Small Businesses: Key Trends

The activities of small businesses are characterised by several features that lead to changes in accounting and audit algorithms, moving in the direction of simplification. At the same time, simplification does not always guarantee the quality of information and control, which requires searching for methodical approaches to the use of accounting, reporting, and audit standards adapted for business entities with limited material and labour resources. Additionally, it requires considering the cost-benefit principle for small businesses. This problem exists not only in Ukraine but also in other countries, as the “think small first” principle has been proclaimed in the EU. The article aims to identify key problems of auditing small businesses in Ukraine and to analyse the practical aspects of its results. The study reveals typical inaccuracies identified during the audit process at small businesses, which are often due to existing practices of “simplified” accounting. The author employs a complex mixed-methodology approach that incorporates methods of economic analysis, structural-logical analysis, and semi-structured interviews. Analysis of data on the audit of small business entities, taken from reports on the state of audit activity in Ukraine, published by the Audit Supervision Council, has made it possible to identify the main trends in the interaction between audit companies and small business entities. Based on the systematisation of the results of previous scientific works and the author’s empirical research, the main problems of small business audit were identified, which are subject to solution by the scientific community and practices. The results of the study indicate that the specificity of small business audit is due not only to organisational aspects that require specific features in the application of ISA, but also to typical solutions for accounting operations. The dominant trend in small business management is the desire to minimise the expenditure of time and resources for accounting. Thus, the requirements of accounting standards become secondary, as the consequences for non-compliance are significantly smaller than those for violating tax rules. The results of this study provide a deeper understanding of the challenges in small business management and can inform the development of a simplified accounting concept for small business entities.