Most of the legislation has dealt with financial reporting fraud that has taken place in publicly traded companies. However, there has not been such legislation for non-public companies or for audits of non-public companies.

Required
a. Is the auditor's responsibility for detecting fraud any different for audits of non-public companies vs. audits of public companies? If yes, how does that responsibility differ?
b. Are auditors in smaller companies more likely to find defalcations or financial reporting fraud? Explain.
c. Most small non-public companies have inadequate segregation of duties and poor internal control systems. What are the implications of the control deficiencies on the conduct of the audit?
d. Why do smaller non-public companies get audits?
e. What are the implications of the fraud standard for the cost of audits of non-public companies? Can society evaluate the cost/benefit of the trade-off in costs and the heightened responsibility to detect fraud? How could the trade-off be measured?
f. Who hires the auditor in most non-public firms?