ASSESSING THE EFFECTS OF MANDATORY AUDIT RELIEF ON THE AUDIT PRACTICE IN THE KUMASI METROPOLIS

Abstract

This study focused on impact of mandatory audit relief on audit practices of SMEs in the Kumasi Metropolis. Primary data were collected from 80 staff of audit firms in the metropolis. The study was guided by three objectives namely, to determine the relevance of mandatory audit relief; effect of mandatory audit relief on the operations of auditing companies and to examine the effect of mandatory audit relief on audit practices of small and medium scale enterprises in the Kumasi Metropolis. The analyses were done descriptively with the help of SPSS, version21.0. This study found out that majority of auditors believe that mandatory audit relief was not relevant to SMEs. They believe that mandatory audit relief can lead to fraudulent financial statement which has severe consequences on the end users of the financial statements. This study observed that mandatory audit relief has significantly reduced the average annual incomes of audit firms from GH¢80,000 to GH¢47,000, staff strength of audit firms from average of 13 to average 7. However, mandatory audit relief has not significantly impacted on client size of the audit firms. This study observed that introduction of mandatory audit relief has reduced compliance audit, construction audit and financial audit decreased in the SMEs. However, tax audit, information system audit and operational in the SMEs have remained the same. The SMEs should be encouraged to undertake all relevant audit services such as compliance audit, construction audit and financial audit. Audit firms in the Kumasi Metropolis should diversify their operations since over reliance of audit service activities will make them have lower income due to the introduction of mandatory audit relief.