Impact case of the month
Small and medium-sized businesses, also known as SMEs, represent an important part of the economy. However, international auditing standards have not been well tailored to this business category. Niels van Nieuw Amerongen, holder of the Kreston Netherlands SME Accountancy chair at Nyenrode Business University, analyzed with a research team stakeholder roundtable discussions focused on an international auditing standard for less complex entities. He summarized the findings in two international publications.
The existing international auditing standards apply to all annual audits, regardless of the size of an organization. These auditing standards do contain a number of considerations that auditors can apply in a SME environment. “In practice, it appears that auditors in an SME setting often struggle with these considerations”, explains Van Nieuw Amerongen. “For example, because SMEs have a less formal internal control organization, or because auditors experience difficulties in applying an auditing standard in specific situations, such as those involving a dominant owner-manager.” Auditors from all over the world have therefore been advocating for years for the development of a separate standard for the audit of SMEs. Pressured by various stakeholders, the International Auditing and Assurance Standards Board (IAASB) released a draft auditing standard in 2021 for what they call Less Complex Entities (LCE). This highly simplified new standard only contains the core requirements of the existing auditing standards.
To assess stakeholder views on an international auditing standard for SMEs, the IAASB has organized international roundtable discussions. A project team, chaired by Prof. Dr. Niels van Nieuw Amerongen RA, has analyzed these discussions and reported the findings in two international publications in the Journal of International Finance Management & Accounting. The articles have a direct impact on the regulations of the IAASB, which is currently working towards a final version of the new LCE standard. In this standard, the IAASB has included qualitative (group audit) characteristics that are directly related to the two articles by Van Nieuw Amerongen et al. (2023). In general, there is little research in the field of audits in SMEs, making research and literature on this topic very scarce. The two articles by Van Nieuw Amerongen are therefore new in this field and many references are made to these articles in one of the latest articles in the Journal of Accounting Literature. The magazine has also asked Van Nieuw Amerongen to act as an expert reviewer.
“Because a large number of audits are SME-related, the LCE standard will have a significant impact on the work of auditors”, according to Van Nieuw Amerongen. “They are expected to use this new standard in practice.” That is why, in addition to the international publications, Van Nieuw Amerongen also gave an interactive lecture for Nyenrode’s Vereniging van Accountancystudenten (Association of Accounting Students) and a presentation for SME auditors at business service provider V&A accountants-adviseurs.
An impact case includes a research portfolio around a central theme, focusing on the reach and impact of that research. The impact cases are easy to read for a broad audience, they demonstrate how Nyenrode is strengthening its connection to practice and how faculty members are finding practical solutions to relevant and current challenges in practice.
The impact cases are divided into the categories Leadership, Entrepreneurship, Stewardship, and Educational Innovation.
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