"We are getting that 17 people, mainly combatants, died in the fighting and some vehicles were destroyed," Ali Moalim Kerow, an elder in the nearby town of Rabdhure, told the Agence France Presse news agency on Monday.
Hassan Mohamed, an al-Shabab commander, said that the group had taken control of the town "after defeating ... the apostate government" a day earlier.
"Many of their dead are strewn in the streets of the town and our forces pulled out this morning," he said.
'Full control'
However, the government claimed that they had repelled the attack.
Shine Moalim Nurow, a government military official, said: "They attacked us in the evening, but with no success.
"They retreated and we killed more than 10 of their fighters. Our forces are in full control of the town."
Nicolas Bwakira, the AU special representative for Somalia, said that wider AU mandate is needed in the Horn of Africa nation country if their mission is to succeed.
Speaking at a funeral service for 12 Burundian AU peacekeepers killed by a twin suicide bomb attack last week, he said: "The time has come to re-examine Amisom's [African Union Mission in Somalia] mandate so that we can have the power to act when and as necessary.
"We call today for more equipment, more financial means, reinforcements, and a stronger mandate which gives our troops the right to pursue if necessary."
Deadliest attack
A total of 21 people were killed in the attack on the AU headquarters in Mogadishu, the Somali capital, on Thursday, including the peacekeeping force's second-in-command.
"The death of General [Juvenal] Niyonguruza and his comrades will not discourage us," said Yves Sahinguvu, the vice-president of Burundi.
"Burundian soldiers are today in Somalia and they will not leave this country until they have completed their mission with the help of the international community, the UN and the African Union."
Thursday's attack was the deadliest against an AU force since it began its mission in Somalia in March 2007.
It was followed by a call on Sunday from the leader of Somalia's anti-government Hizbul Islam group for more attacks against AU peacekeepers.
Violence and anarchy
Hizbul Islam and al-Shabab have been battling government troops and AU peacekeepers to impose its own version of Sharia, or Islamic law, across Somalia.
Burundi's opposition parties on Saturday called for soldiers to be recalled from Somalia if the AU mandate was not enlarged and they were not given the means to defend themselves.
More than 4,000 AU peacekeeping troops are in Mogadishu, solely from Burundi and Uganda.
At least 29 Burundian soldiers have been killed in the country since their mission began.
Somalia has been ravaged by violence and anarchy since warlords overthrew Mohamed Siad Barre, a former dictator, in 1991, before turning on each other.