As many companies have activated their disaster response plans or are scrambling to develop disaster response plans – your audit team must become creative to keep audits on track. Social distancing can present a myriad of challenges for auditors; however, auditing standards are still in effect and therefore must be conducted in compliance with current standards.
AICPA Chief Auditor Bob Dohrer reminds us that “This is no time to abandon professionalism and attention to detail. It’s the compliance that brings order and some normalcy, if you will, to the situation we’re going through today. The (pandemic) doesn’t lead to an audit holiday. We can’t issue financial statements and auditor reports that just kind of say we did the best we could.”
So, what does that mean for auditors and organizations? It’s time to get creative, do additional planning and leverage the opportunity to enhance the risk-management practices that protect the organization and business. Below, we dive into a few considerations, potential challenges and solutions.
It is critical to communicate and connect with your audit team. As telework becomes the new norm, your team will be looking to you for clear communication, motivation, encouragement and support. Keeping your team focused on the vision and mission can play a dramatic role in keeping them accountable and productive. Provide the training, support and open lines of communication that they will need to continue to perform a more agile, effective and efficient audit. You may even find that improved processes emerge and enhance the overall process going forward.
The use of technology will play an enhanced role in the audit process during this pandemic. Whether it is video conferencing, secured documentation or practice management tools – any additions to your technology should be determined and then properly trained on. The technical knowledge of your team will be paramount to conducting a proper audit in the expected timeframe.
Need for specialists should be determined as soon as possible as the demand for them, especially valuation experts, will be high. Remote audits will require more advanced planning to meet needs during unique circumstances.
With business operations being completely disrupted, there will be major changes to how audit teams perform certain tasks. For example fraud inquiries, internal control reviews and other processes are traditionally done in-person. There are times, such as with a fraud inquiry, that an auditor relies on observed body language and behavior. Rather than go without those important cues, consider using video conferencing to allow the team to observe facial expressions, body language etc.
Additionally, it’s important to consider how to handle how the audit team keeps control and obtains the information that they need. With modified audit procedures, audit teams should rely more heavily on external confirmations rather than information solely from management. The challenge of course then becomes, are your external contacts operating in a modified fashion or even available to respond?
Obviously it is preferred to be able to touch or get close when assessing inventory, but inventory observations can be done using video. If you already began this process, document the procedures before you switched to video as well as the results and conditions of those procedures. Audit teams can go above and beyond to verify the contents and location of the video feeds by documenting these attributes. If the auditor is unable to come up with adequate alternatives to physically observing an inventory, it may result in modifications to the auditor’s report on the financial statements
Currently USPS, UPS, FedEx and other delivery services are still operating. The standard requires that you obtain a physical signature by the time you release your report, so it is recommended that you utilize delivery services to obtain physical signatures during the process. Even if you obtain electronic signatures for example, using DocuSign during the audit, the standard requires that you follow up and obtain physical signatures. It’s highly recommended to simply adjust your process to get original signatures rather than having to go back and obtain the physical signatures anyway.
Extra time to plan audit engagements should be spent, as current audit processes may not be relevant during this time. There will likely be changes to the business’s normal process including how they take payment, process financial information etc. due to the nature of the temporary working arrangements. Determine which of your normal procedures still apply and which ones need to be modified to account for these changes.
Now is the time for creativity, discipline, leadership and innovation. Auditors can meet expectations and deadlines in a meaningful way, using a new mindset and creative solutions.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.