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The purpose of this paper is to analyze audit planning decisions of small and medium-sized Spanish audit firms and the resulting impact on audit risk and effort. Prior research examining audit risk overwhelmingly focuses on Big 4 audit firms, and little is known about how audit planning decisions influence audit risk in smaller firms, a significant part of the audit profession. Thus, it is important to examine the planning judgments in small and medium sized audit firms and the link between planning risk assessments and the extent of audit effort put forth to achieve an acceptable level of audit risk. Using audit engagement specific data derived from publicly available databases and survey data, this study investigates the factors assessment of their client’s risk of material misstatement and whether the effort applied in performance of the audit engagement effectively responds to that risk. We find a significant statistical relationship between audit risk and audit effort, which provides empirical evidence that auditors modify the extent of audit effort based on perceived audit risk and brings into debate the work of the small firms. Additional analysis shows that audit effort (i.e., hours) is significantly influenced by the tenure and the timing of the audit engagement (i.e., peak audit season). However, audit engagements with longer tenure do not adjust their audit effort in response related to low management integrity or weak internal controls, which suggests familiarity, that is, auditors may not be as skeptical of management incentives. This paper contributes to debate about audit quality and whether the size of audit firms serves as an observable characteristic associated with higher audit quality.