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7 Key Considerations For The Virtual Audit

A Call for Remote Leadership

Auditing remotely, as opposed to on-site at client premises, is nothing new. Many auditing firms have been conducting remote or semi-remote audits for quite some time.

However, what was unthinkable just about six months ago, was that both the audit firm and the client’s entire accounting and finance function would need to be remote! 

The organizations and firms that were “early adopters” and made forward-looking investments in digital infrastructure in line with global business trends certainly have been more prepared, but who thought (and prepared) for a global pandemic that would cause global commerce to practically grind to a halt..?

In addition to the long tail of new challenges that firm leaders are facing in the midst of this pandemic, A&A practices are also wrestling with new risks and financial statement auditing concerns. 

The AICPA hosted a webinar with Bob Dohrer, AICPA Chief Auditor which examined best practices in conducting remote audits of private companies in these uncertain times. 

Here are some of the highlights and key points that were discussed.

Key Considerations

  1. Deadlines one of the key items being discussed by auditors with their clients is of course deadlines. There may be general blanket extensions to watch for in conducting regulatory audits. Clients should consider early communications with their lenders around potential reprieve needed. Additionally, consideration should be given to the potential of having to repay PPP loans including interest, if they did not qualify for forgiveness.
  1. Financial Covenants – financial covenants are likely to be significantly impacted. Support your clients the best you can in having those communications to lenders and creditors as early as possible.
  1. Going concern – volatility, impact, and difficulty to project cash flows. The auditors should consider the circumstances of the client in question, whether an emphasis-of-matter paragraph is necessary.
  1. Internal controls – the client controls relevant to the audit may have changed significantly with the entire workforce now working in a remote environment. This may result in significant deficiencies and material weaknesses in internal control over financial reporting.
  1. New Risks – anything essentially involving estimates will become critical for this year. Other risks mentioned included determining fair value, impairment, fraud, changes in supply chains, and the need to engage evaluation specialists. Analytical reviews may be substantially impacted given the lack of historical comparisons. Adequate training of audit staff on the use of new technology (e.g. video inventory observation) may also present new risks.
  1. Subsequent event disclosures – auditors should carefully consider wording since the rapid change in circumstances around COVID-19 may result in the disclosure becoming stale too quickly and thereby not useful to users of the financial statements.
  1. Scope Limitations – careful consideration should be given to areas of the audit that the COVID-19 situation may restrict the way in which audit procedures were conducted in the past. Inventory observations is one example that is frequently discussed. Nothing in the audit standards prohibit the use of video technology to conduct inventory observations. However, consider the extra steps that would need to be taken, such as verifying the live video feed is actually originating from the correct client location and whether the feed is authentic.

Virtual Verification

This is of course just a glimpse into the wide array of challenges that auditors are currently facing. 

We have also found that audit teams need to significantly increase professional judgment and, in many cases, revisit traditional audit approaches in conducting virtual audits in these uncertain times.  

At SAPRO, we stand ready to assist you in your virtual audit talents needs and thereby also lowering your fixed payroll costs whilst still aiming for the highest quality standards.

P.S. Schedule a call or simply text “Questions” to 646-344-2251 to learn more about how we can help you lower your fixed payroll costs by 20 – 40% by providing you with the best and most sought after offshore (i.e. virtual) certified audit talent during your busy periods.

P.P.S. If you enjoyed this content make sure to sign up here for our latest updates and trends in the world of the modern public accounting firm.

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“Can I text or video chat with my healthcare provider?”
blog
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Date: September 23, 2020
How To Retain Your Top Talent Post Busy Season (It's not what you think)
blog
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Date: September 23, 2020
Boost Audit Profitability: Avoid These 3 Talent Outsourcing Mistakes
blog
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Date: September 28, 2020
7 Key Considerations For The Virtual Audit
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Date: November 1, 2020

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