Introduction
There are three separate assertions made here.
(1) That small businesses are unauditable.
(2) That preparing the financial statements of a small business gives the auditor an insight into that business which is advantageous to his subsequent audit.
(3) That audits of large entities can be rather mechanical.

What is small?
Companies may be defined as small by local legislation using limits based on amounts of revenue or assets. However, the most useful approach is to define what makes a small business not by its absolute size but by its characteristics. Such characteristics might be based on owner management, limited formal controls and simple systems.

Are small businesses unauditable?
The view that small businesses are unauditable arises from the following:
Lack of controls. Many small businesses have few formal controls or none at all. Segregation of duties is often non-existent as the owner may perform most or all of the tasks.
Limited documentation. Documentation may be minimal or non-existent. This may be because the owner keeps information in his head or because there are no formal systems for recording information.
Cost. Audits are expensive and the cost may be disproportionate to the benefits for a very small business.

These characteristics make the audit more difficult but they do not make it impossible.

Advantages of preparing the financial statements
There are two aspects to the assertion that preparing the financial statements gives the auditor an advantage in performing the audit.
Firstly, the auditor who prepares the financial statements of a small business obtains a very detailed knowledge of the business which he can use in performing the audit. For example, he will be aware of all the transactions and the accounting policies.
Secondly, it is worth noting that the IESBA International Code of Ethics for Professional Accountants states that a firm can only prepare financial statements for an audit client on which they are to express an audit opinion where the services are of a routine or mechanical nature and the firm addresses any threats that are not at an acceptable level.

Are audits of large entities rather mechanical?
The inference of this part of the question is that auditors of larger clients do not have to be as concerned with understanding their client as they can more easily use a standard set of audit programmes and working papers.
This is of course wrong. The approach to any client must be tailored to that client’s needs, based on the auditor’s experience and judgement. The audit team must be properly briefed and controlled and all work must be reviewed. Without such an approach the team might perform a ‘standard’ audit and miss a material misstatement due to a lack of understanding.
The planning process must therefore include the preparation of a detailed audit planning memorandum. Staff should be briefed to ensure they understand how their assigned tasks fit into the audit as a whole and they should be encouraged to refer problems to more senior staff.
In summary, a properly performed audit of a large entity should not be mechanical although undoubtedly, it can benefit from some standardisation, for example, via the thoughtful use of pre-prepared working papers, tailored to that client.

Conclusion
When audits are performed properly, small businesses are not completely unauditable and the approach to large audits is not mechanical.