Question Tag: Small firms

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  • 2 Marks

AAA – Nov 2020 – L3 – Q2c – The Audit Approach

Discuss two problems in implementing quality control procedures in a small firm of Chartered Accountants and recommend solutions.

Discuss TWO (2) problems that you may face in implementing quality control procedures in a small firm of Chartered Accountants and recommend how these problems may be overcome. (2 marks)

  • Lack of sufficient technical training and proficiency: Small firms may not have the resources to ensure all staff members have the appropriate level of technical knowledge. Solution: Ensure that the firm invests in continuous professional development and training programs to enhance the technical skills of the team.
  • Inadequate supervision and review: Due to limited resources, small firms may struggle with proper supervision of audit work. Solution: Implement a structured review process and ensure that all work is reviewed by a senior member before finalization.
  • 10 Marks

FM – Nov 2017 – L2 – Q2b – Sources of finance: debt

Discuss the problems small firms encounter in raising capital in the Ghanaian financial markets.

Many small firms encounter a lot of problems in obtaining funds from the entire financial market to run their businesses. This problem has always accounted for their low performance in business.

Required:
What problems do small firms encounter in their efforts to raise capital in the Ghanaian financial markets? (10 marks)

Small firms encounter the following problems in their efforts to raise capital in the Ghanaian financial market:

  • The high cost of obtaining a quotation on the stock market. For most small firms, a quotation has become impracticable.
  • Large firms are better known and provide more financial information than smaller firms.
  • The accounting system in large firms is more sophisticated and is able to provide a greater quantity of more reliable information which can be incorporated into annual reports or profit forecasts.
  • Investments in larger companies are more easily marketable.
  • The smaller business will find it particularly difficult to attract venture capital.
  • Small firms tend to lack the financial expertise to prepare adequate cash flow projections or proper forecasts.
  • The cost of finance to small firms will probably be higher than that for large businesses. In order to attract capital in the first place, the small firm may be forced to pay a greater rate of interest.
  • Some government-supported schemes (e.g., agricultural loan guarantee scheme) specify minimum qualifying levels which exclude the smaller firms.

(Any 5 points for 10 marks)

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