COVID-19 changed how most businesses operate day-to-day. Similarly, many financial statement audit teams were tasked with migrating to a fully remote environment in order to complete year-end financial statement audits and other attest functions. But while these changes to core auditing practices can raise questions around quality, these differences from standard customs are generally misunderstood. Below are some common misconceptions about the remote audit process.
Misconceptions about Remote Auditing
Financial statement audit teams are currently in their second year of an all-remote or near-all-remote auditing environment, and it’s worth demystifying the processes and procedures in place today and how they’ve evolved during the pandemic. It’s also worth noting the misconceptions that arose from the sudden change to remote auditing.
Prior to COVID-19, there was often a remote component to auditing; technology often permits auditors to perform their testing procedures from offsite, but the move to fully remote necessitated quick changes to procedures that were typically addressed in-person.
Misconception: Onsite = Better Quality Reviews
One such pivot was the move away from substantial onsite time. Organizations undergoing financial statement audits may be accustomed to having their audit team physically review or inspect certain elements of their operations. How site inspections were performed certainly had to change in an era when access to physical locations was being closely monitored and restricted, and this may have led to a concern that your audit team would miss or overlook essential information.
Being onsite also helps audit teams learn more about how the company operates by seeing it in action and interacting with a greater number of company personnel than may be specifically relegated to fielding questions and information requests from the external audit team.
Reality: Video Conferencing Provides Some Additional Benefits
As with other routine business communications, remote audit teams switched to video conferencing to conduct site visits in 2020. It presented a benefit of having unilateral and streamlined footage of site visits that even distant team members could access. While the initial disruption of remote visits meant tighter planning parameters needed to be put into place, the unseen benefit to teams sharing work on a wider scale could improve the auditing process.
Video conferencing isn’t a complete solution for being onsite – site visits will remain a critical fixture in the audit process so long as safety protocols allow – but using video conferences more frequently than in the past may help with scenarios where the audit team would like a greater number of eyes on a part of the review process without the time, expense and hassle of sending the entire team out to the worksite.
Misconception: Communication is Better in Person
Pre-COVID-19, audit teams often perform elements of their analysis and review from their client’s worksite, generally in a conference room or other meeting area where their contact can periodically check in to address preliminary issues or questions. Without the luxury of drop-in meetings, organizations may have been concerned about how these questions and issues would be handled and if teams would be hard to reach.
Reality: Remote Work Means More Short Meetings
The use of conferencing tools and chat features – such as Teams, helped sustain the quick meetings that were generally accomplished via the drop-in. Organizations and their audit teams may have also scheduled “stand-ups” or other short duration project updates in a slightly more formalized way than they have done in years past.
Misconception: Remote Auditing Isn’t Secure
Another common concern with remote auditing is cybersecurity, with questions around a remote team’s ability to protect sensitive financial documents and data. Remote audits involve a high volume of financial information to be shared electronically, and being offsite from an organization’s secure network poses a risk to unwanted external intrusion to the process.
Reality: Information Security Has Always Been Paramount
The threats already in the information security environment have already put a significant importance on document security. For this reason, most audit teams were already using secure document portals to upload and share documents electronically. The switch to fully remote auditing—while forcing teams to pivot quickly and without deprecation to quality or privacy—was perhaps less jarring than many were led to believe. Modern advancements like cloud-based software, real-time auditing, and read-only access to documents protect the integrity of sensitive materials while facilitating the pivot to a remote environment.
Misconception: The Audit Team’s Use of Time Won’t Be As Efficient in the Work-from-Home Scenario
Finally, the added strain of time management among team members balancing work from home suggests that remote auditing makes time management a larger challenge. When audits were performed in-office, organizations could see that their team was working on the task at hand. Physical visibility into workflows wasn’t possible in the remote work environment for any function, let alone one that comes with billable hours to your organization.
Reality: Communication Protocol Became More Defined
The solution for productivity in the remote environment is the same for audit teams as for other internal functions. It demands more stringent and clear communication channels with clearly defined parameters around meetings and deliverables. These more closely guarded deadlines and procedures support and provide clarity for members of the team dealing with complex arrangements from home. Standardized procedures around meetings, check-ins, and calls bridge and replace the pre-pandemic “normal” seeing the work being done.
Analyzing Long-Term Changes from the Remote Environment
Year two of a semi-remote financial statement audit raises important questions about the long-term changes that may be coming to the financial statement audit practices. Although teams may be conducting more in-person site visits again in the future, other principles adopted during the COVID-19 disruption may become permanent fixtures, enhancing transparency and efficiency in the audit process. Some of these new best practices for financial statement audit teams include:
Being able to meet in a video platform scenario was a necessity in 2020, but chances are, now that the door to Zoom, Teams, and other video conferencing solutions is open, video meetings won’t be going away entirely. Rather than following travel intensive schedules or long stays onsite, audit teams may be migrating to a hybrid in-person/video approach going forward.
A technology-heavy audit process brought some practices already present in technology companies’ workflows, such as the concept of “agile principles.” Agile working emphasizes people over projects and incremental deliverables over milestones. With shorter and more iterative progress, teams realize short-term gain and value. In a virtual workspace, audit teams can use more frequent “stand up” meeting environments, checks, and client communication portals to demonstrate real-time results.
Many audit teams understood the value of data analytic tools before COVID-19; however, data analysis has an even more prominent role in remote work scenarios. Leveraging a large volume of data allows teams to conduct more tailored risk assessments and spot anomalies in trends, cost overruns, and quality requirements.
Digitizing Manual Processes
COVID-19 required many manual processes to be shifted to the virtual environment, including signatures, hand-offs, and the digitizing of audit-related documents. While many processes still put preference on manual documentation, long-term solutions to these short-term adjustments may emerge as the norm in the future.
Renewed Protocols for Cybersecurity
More than ever, information security is critical for remote audit teams and organizations that can no longer afford to make security an afterthought. As cloud-base file sharing and other new technologies advance, security protocols during engagements will demand additional conversation for both audit teams and organizations.
While the shift from a fully in-person audit experience to remote auditing was already underway, the onset of COVID-19 pushed auditing teams to quicken the pace. Today, financial statement audit teams are tasked with applying the latest digital technologies to their procedures and best practices to maintain quality standards, meet deliverables, and preserve the integrity of the auditing process. To learn more about how the remote auditing team can support your business this year, contact us today.
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