An email sent to clients last week by Elliott Group CPAs in Charlotte, N.C., committed the firm to a new level of remote work on audits as a result of the coronavirus pandemic.
The firm, which conducts employee benefit audits, announced that audit team members did not plan to visit clients until at least May 15.
In addition to creating a public health emergency accompanied by devastating economic consequences, the coronavirus pandemic has accelerated the movement of the auditing profession toward using remote techniques to perform engagements.
Monique Elliott, CPA, managing partner of Elliott Group, said firms’ clients are likely to always remember how their auditors responded to the pandemic. That’s why it’s so important to carefully consider the best way to deliver a high-quality audit at this time.
“You want to have a good relationship with your clients in the future,” she said. “Take some time in advance. Think this through. Figure out what you can and can’t do, how you can be helpful, setting the right tone, making sure the messaging among all your staff is consistent.”
Remote auditing has long been a challenging topic for the profession because of the belief that auditors may be more likely to discover fraud, malfeasance, or simple mistakes when they visit a site. The worried look on a hurried senior manager’s face, the use of antiquated technology, and the unmistakable vibe of a toxic culture all may be cues that something is amiss that might be more easily observable during a site visit.
That’s why practitioners who are performing procedures remotely must make certain they are following the standards and take extra care to use all the technology at their disposal to avoid missing anything. When performing remotely, auditors have the same obligations to comply with standards and deliver high quality as they would when working on-site.
“We just can’t cave — on our commitment to quality, adherence to our standards, and our level of service to our clients,” said Jodi Malis, CPA, CGMA, partner in charge of quality control at Hancock Askew & Co. in Atlanta. “We can’t make excuses. We need to think through how we are executing our remote audits — what’s a different way we can perform our procedures, while offering a personal touch.”
Technological necessities
Improvements in technology have enabled new ways of auditing remotely, and a few should be viewed as necessities for successful remote audit procedures.
One is videoconferencing technology, which gives auditors the ability to hold live interviews with clients and watch for visual cues that would be observed during a site visit.
“I want to see that person’s face,” Malis said. “I want to talk live. I want to have that personal touch.”
Many videoconferencing platforms also enable auditors to share documents on their screens for simultaneous viewing with others in the conference who are off-site.
Secure web portals, meanwhile, are critically important for secure sharing of documents. Because of security considerations, email is viewed by experts as an unsafe way of sharing sensitive information such as financials and personal information about employees that auditors often examine.
Firms instead are using secure web portals to review clients’ documents and communicate with them. Some portals even have a Q&A functionality that allows questions to be asked, answered, and documented.
“It’s just a better way for us to have the project management over the audit,” said Gwen Stoute, CPA, a partner who leads the employee benefit plan practice at HoganTaylor in Fayetteville, Ark.
Elliott’s firm also has secure, read-only electronic access to some clients’ combined payroll/human resources systems, which has enabled real-time auditing of payroll systems throughout the year.
“Having access to that right now, there’s so much that we can do,” she said. “We can test without our clients being involved, which also creates opportunities for unexpected audit procedures, to help mitigate risk of fraud.”
This access gives the auditors an opportunity to see thorough documentation of the systems and how information is transmitted between systems. The documentation assists the auditor in getting a complete understanding of any reporting he or she receives throughout the audit.
Continue following standards and procedures
Although this is a challenging time for auditors and everyone in the business world, practitioners still are required to meet the auditing standards as they fulfill their duties to protect the public interest.
It’s not enough to say, “I did the best I could under the circumstances.” Melissa Critcher, CPA, a sole practitioner in Charlotte, N.C., who focuses on employee benefit plan audits and professional education, said it’s critical at this time for firms to make sure they continue to follow their normal policies and procedures.
Documentation requirements, for example, are just as important in remote audit procedures as they are at the client’s business site. Critcher recommends preserving electronic communications with clients.
“Make that part of your workpaper documentation,” she said. “Just like you would document any verbal communication you have with your client, the electronic communication needs to be documented as well.”
Communication also remains vital to a high-quality audit when remote procedures are being performed. Malis advises her team members to mirror their procedures for on-site audits as much as possible when they are auditing remotely.
“My communication to the team is, think about if you were sitting at a [client’s office] and you would go down the hallway and talk to them. Then at that specific point in time, pick up the phone and call them,” she said. “Don’t send them an email. So don’t change what we would normally be doing.”
Malis organizes her team’s thinking about remote auditing around four issues:
- Procedures for complying with audit documentation standards.
- Reporting of issues such as accounting estimates, impairment, fair value, subsequent events, and going concern. In the current environment, more specialists may be needed to work through these issues, and these specialists will be in high demand.
- Managing audit team interactions in a virtual environment. With many practitioners working from home while children are home from school, scheduling time together can be a challenge, but with proper planning, it can be accomplished. Team members should be there for their families, as well as to be productive at home.
- Handling interactions with clients. Communication is critical even as clients may be struggling to manage their cash flow, work forces, and health and safety procedures.
“We’re definitely reaching out to our clients more,” Malis said.
Remote auditing considerations
Some tips for auditors to consider as they conduct remote audits amid the coronavirus pandemic include:
Consider accuracy, completeness, relevance, and reliability. These are four critical components for each piece of audit evidence. “You have to use your judgment, and I think the biggest risk and the thing that’s confusing people is, what is reliable, relevant evidence that you can use in an electronic environment,” Elliott said.
Beware of the potential for cyberattacks. “There seems to be increased risk related to hackers trying to take advantage of this coronavirus situation to get access to systems by having phishing scams related to the coronavirus,” Stoute said.
Turn on laptop cameras for team meetings. “I’ve told everybody, let’s get our cameras on, we want to see each other, we focus better,” Malis said. “There is a better connection with each other when we can see each other. It’s helping everybody feel not so isolated.” On-camera discussions and interviews with clients also would be essential in the remote audit process.
Embrace flexible schedules. This applies to clients as well as audit team members. “We may have to be willing to change our times to make it convenient, more accessible for our client base,” Critcher said. “I think that’s absolutely a given in this scenario because you’re going to have people who can maybe work better from 6 a.m. to 9 a.m. Or 6 p.m. to 9 p.m., depending on their schedules.”
Be prepared for permanent change. “Everyone is going to do business differently after this,” Elliott said. “This is not going to be like, ‘How do we get through the next three months or the next three weeks?’ This is going to be impacting people’s strategy going forward, and so I think discussions have to be had on all levels, short-term, mid-range, long-range.”
A valuable tool
Remote auditing may not be a complete solution for all the challenges the coronavirus has created for auditors. For example, Malis said her firm is looking at different ways to handle inventory observations should firm members not be able to be on-site.
But when it’s possible to perform remote audit procedures in a thorough manner, they may be a valuable tool for auditors at this difficult time.
An in-depth discussion of remote auditing is available on the rebroadcast of a free webcast with AICPA Chief Auditor Bob Dohrer, CPA, CGMA, and Andrew Prather, CPA, CGMA, a shareholder with Clark Nuber in Bellevue, Wash. The webcast will be available on March 25, April 1, and April 10.
More information on working remotely is included in the following content:
- “Switch to Virtual Client Meetings Amid Coronavirus Fears”
- “Tech Tips for Firms Responding to Coronavirus”
- “What to Do If Staff Can’t Make It to the Office”
- “5 Tips for Effective Remote Meetings”
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.
