What Is a Smaller Entity?

An entity which typically possesses qualitative characteristics such as:

• Concentration of ownership and management in a small number of individuals (often a single individual – either a natural person or another enterprise that owns the entity provided the owner exhibits the relevant qualitative characteristics); and

• One or more of the following:
  • Straightforward or uncomplicated transactions;
  • Simple record-keeping;
  • Few lines of business and few products within business lines;
  • Few internal controls;
  • Few levels of management with responsibility for a broad range of controls; or
  • Few personnel, many having a wide range of duties.

These qualitative characteristics are not exhaustive, they are not exclusive to smaller entities, and smaller entities do not necessarily display all of these characteristics.