The Public Company Accounting Oversight Board has published guidance to help auditors apply Auditing Standard No. 5 to audits of internal controls at smaller public companies.
The guidance also notes that upper management needs to be watched carefully at smaller companies.
"The risk of management override of controls exists in all organizations, but the extensive involvement of senior management in day-to-day activities and fewer levels of management can provide additional opportunities for management to override controls in smaller, less complex companies," said the publication. "Company actions to mitigate the risk of management override are important to the consideration of the effectiveness of internal control over financial reporting."