Auditors Navigate Audits Virtually, with Quality!

In this world turned upside down, how do auditors navigate audits virtually, with quality? That is the question we will address in this blog post.

Unsurprisingly, since the early days of civilization accountants have been there keeping our society moving forward.  Currently, though, we are navigating turbulent times. Nonetheless, accountants – the quiet heroes – continue working tirelessly to provide essential services that businesses rely on to keep running.  Certainly, auditors were already used to working away from the office. However, now they have unique challenges due to physical distance from both their audit teams and their clients.  For that reason, we talked to three auditors in our recent Audit Talks Podcast series called “Auditors Working Remotely”. In these podcasts, these industry thought leaders help us to:

  • One, understand their considerations.
  • Two, learn how they quickly pivoted so they could continue to serve their clients with efficiency and quality.

Here is what they said about how auditors navigate audits virtually, with quality.  

Question: How has this new virtual world impacted finishing any audits that were in progress?

Chris Geno, Saville Dodgen & Company PLLC: “That’s something that we’ve thought about a lot. The March 31st and April 30th deadlines are big ones in the audit world. So, that this crisis escalated mid-March, right as those audits were finishing and ending, has presented challenges. Specifically, our firm decided to disclose this as a subsequent event. You seem, almost all entities are impacted in some way. Also, most have no idea exactly what the full scope of that impact will be. Reason being that the audit work is still going on since most of it was associated with 2019 activity. So, there isn’t a significant amount of exposure. However, I do think that going into the future, we really have to be thoughtful about our audit approach and about the questions that we’re asking about how we’re communicating with our clients. Especially as we start to think about jobs that are coming up later.”

Have you had to change your audit approach?

Chris Geno: “I think that one of the biggest things is to consider if they are a going concern. Especially for clients that may have already been having some struggles. In fact, this can be a big problem depending on loan covenants coming into the end of Q1 2020. Unfortunately, there may be clients that are failing even though they looked like they were in great shape just a month ago.

Some of the other things we fear, or expect, going forward are our estimates that are based on future revenue. This could be impairment related, especially as entities have intangibles or goodwill. In 2020, they should think about whether this has impacted them in a way that’s going to cause impairment. Also, the other consideration is doubtful accounts. I think we’re only still in the beginning part of this. Therefore, there’s a lot of opportunity for customers to end up in a situation where they won’t be able to pay. So, consider allowances, and even inventory allowances, on whether you can sell the goods that you have. Those types of things are what you’ll definitely want to be thinking about going forward.”

Question: For audits that are about to start, how are you thinking about those differently?

Jim Bourke, Partner & Managing Director of Advisory Services at Withum: “I have to tell you, we never evaluated in our audit brainstorming sessions whether it would be possible to audit this client remotely. Instead, we simply just booked the flights, booked the hotels, booked the rental cars. That was just what we did. With that said, going forward, I guarantee you that we will look at the way in which we perform the audit. For example, is it necessary to go on-site? If not, that’s a win-win for us and a win-win for our clients. Because in an audit, generally what happens is you have a fee plus expenses. Clients are paying for expenses. So, it’s a way to bring down the overall cost to our client. And maybe, if we’re not bringing down the overall cost, we’re making ourselves more efficient with fixed fee engagements. In fact, maybe we could do significantly more of the audits going forward on a remote basis. I think every firm across the country is going to be evaluating that same concept. Because, I’m sure many firms are finding they can get work done … as long as they’ve embraced a cloud model.”

Question: How are you coordinating with your client to obtain audit evidence? How has that changed?

Steven Morrison, Partner & CohnReznick LLP: “The underlying audit evidence that we’re going to be obtaining is probably going to be very similar in some cases. With that said, it’s that aspect of the coordination, thinking a few steps ahead regarding this. Maintaining our skepticism as we go through this. Having that attitude of a questioning mind and the critical assessment of audit evidence that we get there. Fact is, there’s no real Corona virus GAAP or GAAS exception that’s out there. So, we do recognize that there might be some more coordination needed to obtain our “sufficient appropriate audit evidence”. But, we’re still going to need to be able to get that sufficient appropriate evidence as appropriate.”

Question: How do you provide the right guidance to junior staff?

Steven Morrison: “That’s an excellent question, and we’ve put a lot of thought into that. The CPA profession is a wonderful one and there are a lot of positives to it. Although, one aspect of it that has both positives and negatives is that it is very apprenticeship based. One learns not just from school, not just from reading standards and guidance, but also from learning from the people around them and learning from the people in front of them. Regarding managing junior staff, for me, a big part is having regular communication and dialogue. Especially since we’re not sitting across a conference room table or, a lot of times, not sitting across from our clients either.

In fact, some groups I’m a part of have a standing rule that all calls must be video calls. Even if it’s just two people calling one another. This has been tremendously helpful in making calls more personal and keeping them effective. Seeing each other’s body language is helpful. And, when it is a group call, I notice more participation. There’s less of that awkward silence because people can see one another. So, overall for junior staff and really the whole team, I think emphasizing within the regular communication as appropriate that we’re still doing an audit is important. Same auditing standards, professional skepticism, and objectives still apply. We’re all in this together.”

How has technology enabled you to make this pivot to the virtual world so quickly?

Jim Bourke: “We are 100% in the cloud today. Yes, we’re using CCH ProSystem fx Engagement with CCH ProSystem fx Knowledge Coach. In fact, that technology sits up on Azure and we use a VPN to access it. So, to me, it’s in the cloud. Every single application that our staff needs to have access to today sits in the cloud. And, to me, the cloud is “anything other than behind your bricks and mortar”. In other words, if you can access it anywhere, anytime, remotely, 24 hours a day, seven days a week, it’s in the cloud. Additionally, every professional at Withum carries a laptop with encrypted drives. Every receptionist, secretary, level one staff, partner, IT guy … everyone carries a laptop. Therefore, everyone can access all our applications, all our data, 24 hours a day, seven days a week, no matter where they may be. That’s what we have embraced. We’ve embraced that entire concept. 

Furthermore, we wouldn’t be where we are today without technology. Moreover, I would argue that every CPA firm today in our country is a technology company. Because, quite frankly, we’re counting on companies like Wolters Kluwer to continue to embrace that cloud model that lets us work 24 hours a day, seven days a week, remotely, all the time.”

Conclusion

In closing, clearly there are some very specific audit considerations as auditors navigate audits virtually right now.  With that said, it is certainly not an audit vacation by any stretch of the imagination. As a matter of fact, auditors have an essential role to play in helping stabilize the economy. Indeed, they are the quiet heroes.

I encourage you to listen to the full podcast series on auditors working remotely. To do that, simply visit our Audit Talks Podcast page. From there, you can listen using your favorite podcast player.

Wolters Kluwer is right by your side to help you stay up to date with audit, tax and compliance changes to support your ability to work remotely. Please also visit our Coronavirus (COVID-19) Resource Page for Tax & Accounting Professionals.

#ForwardTogether

AUTHOR

Cathy Rowe

All stories by: Cathy Rowe