How Audit is Changing in the Remote World
Remote auditing, previously a rarity, quickly became the norm during the COVID-19 pandemic. It seems that shift is here to stay — creating both challenges and opportunities for CPAs engaged in audit work.
Over the past two years of the COVID-19 pandemic, the auditing profession has undergone a major transformation. Auditors have historically had a great deal of face-to-face interaction with clients. Given the legacy of in-person interaction, the change-over to virtual work was especially challenging for our profession.
While businesses worldwide have had to quickly shift to a virtual model when feasible, this process has been especially challenging for auditors due to the nature of our work. As we look ahead to the future, remote auditing is likely here to stay.
Auditing Pre-COVID-19
The audit process looked very different before the pandemic. Many of our procedures, such as the observation of physical inventory counts, were completed in person at a client’s office or facility. During traditional auditing times, auditors would be stationed at their client’s site, working together as a team to complete the audit on a timely basis.
During our busy season, audit teams formed tight bonds — both with each other and with clients — working side-by-side for days. These traditions had tangible advantages, including:
- Close contact with a company’s employees and management teams led to the formation of critical professional relationships.
- Audit teams, who worked in close proximity with the Controller, Chief Financial Officer or other officers, had the ability to quickly get answers to questions or make requests in real-time.
- Working together as an integrated, in-person audit team helped to streamline processes and create efficiencies.
Auditing During COVID-19
When the pandemic took center stage, the auditing profession began its shift to full remote work. Although a modernization in auditing was already underway, the pandemic quickly sped up that conversion. The change was rapid and transformative.
The audit process had to incorporate technology more than ever before, including the addition of video conferencing, cameras, drones and secure file-sharing platforms. With the help of these tools, the industry was able to develop protocols to conduct audits remotely. Suddenly, many of the tasks, historically completed in person, took place virtually.
During this transition, five key audit processes were disrupted:
1. Inventory
This is perhaps where the greatest change has come. The regulators of the accounting industry, the American Institute of CPAs and the Public Company Accounting Oversight Board, have allowed some flexibility regarding the timing of a physical inventory count observation, provided that the client maintains a perpetual inventory system and that an auditor cannot attend in person. In addition, an auditor may be able to present recordings of live video streams as audit evidence.
2. Document Collection
Generally, most of the documents requested by the auditor are available electronically, but traditionally have come in paper form. This includes, for example, bank statements and confirmations from customers, vendors and attorneys. In a remote work environment, the auditor needs to request that these documents be delivered electronically directly to them.
3. Observations
Standards, such as internal control processes, require the auditor to observe a process or procedure performed by others, and some observations are only valid when performed live. In a remote environment, live, real-time video footage, verified by the auditor, occurs instead.
4. Interviews
Audit teams are often required to communicate and conduct interviews directly with company management. Pre-pandemic, these discussions were almost always conducted in person. In most cases, these interactions have now shifted to virtual video conferencing.
5. Audit Risk Assessments
COVID-19 has not only changed how we conduct audits, but it has changed the substance of the audit as well. An auditor must now consider how COVID-19 has impacted their clients’ operations, including access to capital, liquidity and their overall financial position.
It’s a New Day in Auditing
The COVID-19 pandemic will leave long-lasting impacts on the workplace. For some, this means no longer having to work full-time from the office. At the same time, audit work does not have to be 100% remote as many auditors experienced during the pandemic’s peak.
What we see happening now is a hybrid of these two scenarios. Audit teams likely schedule time in the office two or three days a week to attend audit planning meetings or other in-person sessions as needed.
Many tasks that were accomplished via technology during the pandemic continue to be accomplished this way post-COVID. In other words, the integration of technology into the audit process during the pandemic was not a short-term solution — it created a permanent shift in the way audits are conducted.
The new audit process has created efficiencies, enabling long-term flexibility for our teams. Our people are spending less time commuting, less time in meetings and less time at client sites. This ultimately saves the organization time and expenditures, especially when the client sites are in remote areas.
It also means our clients don’t need to be located close to our physical locations, they can be anywhere in the world. Geographic constraints no longer exist, which broadens our potential customer base.
While I do miss the face-to-face interaction with clients, the work and partnerships continue — just in a more modern, efficient and different way.