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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.

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