The COVID 19 pandemic dramatically altered the day-to-day existence of most companies. Though businesses may have had remote-work contingency plans in place, few could have expected the need to implement these procedures almost overnight. And just as state governments enacted shutdowns requiring all non-essential workers to work remotely, many businesses were working with their auditors to finalize year-end financial statement audits and other attest reporting.
As a result, audit processes were also changed overnight. Remote audits have proven successful and are ushering in improved efficiency, but it is important for businesses to remember that careful planning will still be a valuable part of the remote audit process.
What is a remote audit?
Remote audits, put simply, are audits that are performed virtually rather than on-site with a client. Auditing remotely is not a new concept; however, just as companies had to adjust to employees working fully remotely, auditors too needed to quickly adapt their audit procedures and communications to fulfill their obligations while working completely remote.
In the past, financial statement audits, reviews, compilations and other reporting involved a considerable amount of on-site client time, as auditors worked with clients on planning, organization and testing. Luckily, over the last five years, many of these attest functions were already being shifted to remote environments. With some additional time spent on planning, remote audits were able to be performed and completed despite the COVID-19 shutdown. It is likely that remote auditing will continue to evolve and become common in the future, both as a result of the pandemic and also because auditing remotely can be done very efficiently — especially when clients can plan ahead.
Client preparation
As COVID-19 continues to alter the way businesses operate, many are still ironing out their internal control policies and tweaking their remote working procedures all in an effort to operate efficiently. As part of this process, there are several audit-related areas that businesses should consider in order to prepare for a future that involves remote auditing.
- Establishing proper controls for each employee. This is one of the most important ways of safeguarding a company’s assets and information. The management assessment of a company’s internal controls assists auditors in conducting a proper audit.
- Documentation, invoices, statements, and other supporting documentation. Electronic access to this information has become a big challenge for many companies, as it provides auditors with the ability to audit remotely. Many companies now utilize cloud-based software for this purpose, which not only hosts the general ledger function, but includes the electronic copies of supporting documentation. Additionally, it often allows companies to provide auditors with “read only” access to their cloud-based software. The “read only” access allows a company to ensure that their data will not be altered while providing auditors remote access to the information they need to view documentation and analyze the audit trail.
- Cybersecurity — especially while employees work from home. Strong cybersecurity plans can prevent the loss and corruption of information that is vitally important to a company’s audit process.
How are firms performing remote audits?
The shift towards remote auditing was a natural transition that was occurring even before COVID-19, though it has been sped up significantly by the shutdown. Audit teams have virtual tools to efficiently and effectively perform audit functions without sacrificing face-to-face time with audit clients, such as video conferencing software like most companies have already begun using. While auditors may no longer have the benefit of walking into a client’s office to discuss the financial status or review the latest analysis, communication is key to a successful audit, and video conferencing is a valuable way to stay connected throughout the process.
The security of client information is a top priority when it comes to technology and remote work. Our firm encourages clients to utilize a secure client portal to share data during the audit process. As mentioned above, cloud-based software that grants “read only” access to auditors can ensure an auditor’s independence is not compromised.
Advantages and limitations
Historically, working from a client’s location was the best way to accomplish an audit. However, the swift evolution of modern technology has not only provided the possibility of auditing remotely, but increased efficiency in the process for everyone involved. Working remotely allows audit teams to spend less time traveling to a client site and more time working on completing the tasks. This extra time increases availability and communication between client and auditor. Successful audit teams have found that being cognizant of a client’s flexible schedule while working remotely and being readily available to respond to client correspondence has improved communication throughout the audit process and expedited audit completion times.
For those audit clients that require inventory/physical asset observation procedures, the transition to remote auditing may prove more challenging, but it is possible. There are ways to utilize live video cameras to satisfy audit steps. Some situations allow for cycle counts of inventory/physical assets to be performed, which allows auditors to observe counting done by the client throughout the year, as opposed to at year-end. For companies with year-ends coming up that require a physical observation, specific analysis will need to be performed to ensure that enough remote auditing can satisfy the audit procedures. Each situation is different and should be individually analyzed, but the potential for remote auditing to save time and increase efficiency is strong.
Conclusion
The COVID-19 pandemic has presented many business challenges, and accommodating audits was no exception. However, the transition from on-site to remote audits was already well underway, and, sped up by the crisis, has proven to have many benefits for both auditors and clients. It is likely that remote audits are here to stay, whether they are fully or partially remote in the future, and companies are wise to prepare for this.
