Advantages and Disadvantages of the Audit Method Based on Life Stage Analysis

Abstract: In contemporary economic conditions, enterprises operate as open socio-economic systems characterized by uneven, stage-based development, making the concept of the enterprise life cycle essential for understanding business dynamics, particularly in small and medium-sized enterprises (SMEs). Life cycle analysis, widely used in management science, enables auditors to assess enterprise activities dynamically by considering changes in structure, business processes, and risk profiles across development stages. Despite its analytical potential, the application of life cycle stage analysis in auditing SMEs remains insufficiently systematized, and its advantages and limitations are not fully articulated within audit methodology. This study aims to examine the applicability of life cycle analysis as an audit method for SMEs and to identify its advantages and disadvantages in comparison with traditional audit approaches. The analysis demonstrates that life cycle–based auditing improves risk assessment accuracy, audit planning quality, understanding of business models, interaction with management, and the predictive value of audit conclusions, while also revealing limitations related to subjectivity, data availability, auditor expertise, and increased labor intensity. The study systematizes the benefits and constraints of life cycle–based auditing and integrates multiple analytical tools for determining enterprise life cycle stages within the audit process. The findings support the use of life cycle analysis as a complementary audit method that enhances audit quality and value for SMEs when applied alongside traditional financial audits, while highlighting the need for auditor training and methodological adaptation to mitigate identified limitations