Auditor Challenges Amplified by COVID-19

Auditor challenges are ongoing, of course. However, currently, auditor challenges are amplified by covid-19. So, what are CPA firm auditors to do? What’s the best approach to tackling, and overcoming, these amplified challenges?

Interestingly, that was the topic of discussion during a recent webinar, hosted by CPA Practice Advisor and presented by Wolters Kluwer. Titled Auditing Forward-Together, industry experts provided recommendations. Those industry experts included:

  • First, Steven Morrison, CPA, member of the CohnReznick National Assurance office and partner-in-Charge of the Audit Quality Group at CohnReznick
  • Second, Cathy Rowe, Director of Product Management, Accounting and Audit solutions, Wolters Kluwer

And, a major takeaway was that using the proper audit methodology and available technology resources are key to your success. This blog summarizes what was shared during that event.

Challenge #1: Assessing Risk

First, per the AICPA Enhancing Audit Quality Initiative and common peer review findings, one of the biggest challenges for auditors is risk assessment. In fact, this has been an ongoing challenge over the last several years. However, it is more complex and widespread now, due to the COVID-19 predicament. So, rather than just rolling forward risks from last year, auditors should first determine where they need to spend their time. Then, tailor the audit accordingly and, finally, be sure to properly link procedures to risks.

To add, due to the economic hard times during this global pandemic, serious risks to look out for include:

  • One, risk of noncompliance with laws and regulations. Is there management bias?
  • Two, risk on estimates made pre-COVID-19. Is there uncertainty? Is there a going concern?
  • Three, risk of fraud. Are you following industry-recommended client acceptance and continuance practices to detect fraud?

Challenge #2: Understanding Internal Controls

Second, now more than ever, it’s critical for auditors to understand internal controls and identify where they are breaking down. Further, while you may not rely on internal controls, having a better understanding of the control environment helps illustrate risks of material misstatements.

Also, when you consider the impact of COVID-19 this year, any internal controls in place before the crisis may no longer be applicable. But, how do you ask the right questions so that you know? Below are a few insights that Steven shared.


  • One, for receivables, look at payments, aging and write offs, and then ask the following. How do you know the old policies apply in an economy seriously slowed down or shut down? If people aren’t working and money isn’t coming in, will they pay their receivables as quickly or even at all?”
  • Two, regarding inventory, where does the amount come from? How does it get here? Is this supplier in rural China? How is it going to be shipped over here? Now that we have it, where does it need to go to and how will it get there? Does anyone still want it? If it’s perishable goods, and we have our transportation, will that shut down or be seriously backed up? Will that inventory get to a customer in a reasonable amount of time, or are we talking about a write down?   
  • Three, concerning, accruals, think about expenses that have been incurred in repositioning, and redeploying personnel or equipment. Also, cleaning and disinfecting office spaces, and maybe some inventory related charges. For transported inventory, maybe something had to go by air because it couldn’t go by truck. So, those have additional advertising expenditures, additional compensation costs and more.
  • Four, for leases, look for contractual modifications. Fact is, people are refusing to pay landlords and trying to renegotiate leases. 
  • Five about revenue recognition, consider whether the person selling a widget is also selling the delivery of the widget, the installation of the widget, the training on the widget, and a warranty associated with the widget. If the terms of those items change in terms, or don’t play out the way we initially estimated, revenue recognition may change.

Bottom line, consider the impact of COVID-19 so that you ask the right questions. Then, incorporate your understanding into your audit approach.

Challenge #3: Incorporating Data Analytics

Because of the AICPA mandating that all audits incorporate data analytics, firms now need a data driven audit. Most importantly, one that provides insights for the client.

Notably, your success with that depends largely on the software you use. First, you need an easy and efficient way to extract detailed general ledger and sub-ledger data. Then, you to be able to match items to one another to verify what management reported. Additionally, that step also allows you to test and consider the internal consistency of the records and reasonableness of projections. 

Fact is, data analysis helps with sampling, fraud detection, duplicates, identifying gaps in sequenced items and performing complex calculations. And, thanks to great improvements to data analytic software in the last several years, auditors can quickly and efficiently run tests and analysis.

In summary, the AICPA is modernizing the standards to show how technology can increase the quality and efficiency of the audit, and how firms can use the data as audit evidence. They are doing this in order to increase the quality of the audit.

Now, let’s take a quick look at solutions designed to help auditor challenges. Even those amplified by COVID-19.

Solutions – Methodology

When it comes to the best audit methodology available, look no further thanCCH Axcess™ Knowledge Coach and CCH® ProSystem fx® Knowledge Coach. Developed in direct response to the risk assessment standards that came out years ago, these products have a patented, knowledge and risk-based audit methodology. That allows the auditor to:

  • One, tailor the audit based on the characteristics of the firm and the engagement
  • Two, link audit steps directly to risks
  • Three, review risk diagnostics
  • Four, monitor the engagement for completeness and compliance

Steven shared this personal experience during the webinar. “Knowledge Coach spurs the auditor to think about risk assessment early on and throughout the entire audit. The workpapers led me through the audit process in a linear way that was easy to follow.”

Indeed, the AIPCA has plans to reform the training regimen for peer reviewers.  That reformation gives firms a chance right now to make the changes needed before they fail a peer review. So, if you haven’t checked out Knowledge Coach, with its knowledge and risk-based methodology, then now is the time.

Solutions – Data Analytics

Regarding data analytics,TeamMate® Analytics is a must-see solution. It assists auditors and accountants in formatting, manipulating, extracting, and analyzing accounting and financial data – easily and efficiently. Also, it supports analytic testing with configurable modules that automate audit tests. Finally, with this solution, you’ll save countless hours of work and time on monotonous tasks. Accessed from within Excel®, TeamMate Analytics includes powerful analytical tools such as gap and duplicate detection, Benford’s testing, Monetary Unit Sampling, and stratification.


To conclude, auditor challenges aren’t going to disappear. So, tools that will help you overcome them are worth investigating. Afterall, when you leverage the right audit methodology and latest technology, you can overcome the auditor challenges proactively versus reactively!

To hear all of Steven’s and Cathy’s valuable insights, listen to the webinar recording, Auditing Forward-Together.


Joel Ortner

All stories by: Joel Ortner