Gathering sufficient audit evidence in a remote audit environment is requiring auditors to be creative and to implement new techniques. Physical examinations, inspections, and observations are still required by auditing standards. Also, the auditor is still required to develop an understanding of the controls pertaining to the major transaction cycles and accounting processes, perform fraud interviews, physical inventory observations and other tasks traditionally done in person.
Audit insight previously obtained by looking over a client’s shoulder as they perform a task, reading facial expressions and body language when responding to inquiries, are more challenging in a remote environment. The Covid-19 pandemic has affected most clients, both financially and in how they conduct their businesses. These changes must be addressed when assessing audit risks in planning the audit.
Performing an audit remotely will require increased and new uses of technology. Technology often used for meetings such as Webex, Zoom, etc. may be used in performing audit procedures. Use of live streaming video and drones may be necessary for physical inventory observations.
Determining the technological tools currently in use by both the auditor and the client, or that can easily be obtained and implemented, is necessary to effectively plan and perform the audit. Technology solutions for the following must be considered:
- Auditor access to client’s accounting system
- How to transfer documents between the client and the auditor
- Conducting meetings where seeing each other is important
- How to perform walk-throughs of the significant transactions cycles
- How to observe inventory
When assessing audit risk, the documentation of the auditor’s understanding of the clients’ major accounting transaction cycles and the related internal control processes and systems are more challenging in a remote environment. Factors to consider:
- Did the client’s office close?
- Were or are some client staff working remotely?
- Have the processes or procedures changed either temporarily or permanently?
- Have tasks been temporarily reassigned?
- What is the effect of any changes in the processes and procedures on internal controls?
- Were there different processes for periods of time when the office was closed or when certain staff were working remotely?
If there were different processes in place throughout the audit period, the auditor should document their understanding of the controls for each major transaction cycle for each portion of the year. Based on their understanding of the processes and procedures, audit risks should be considered for each period and process, and potentially, developing audit procedures that are different or expanded for portions of the year.
Professional standards require a physical observation of a client’s inventory, however, the standards do not require a physical presence or prohibit performing the observation remotely. To perform an inventory observation remotely, use of client personnel using video streaming is an option. One client staff can videostream while another performs test counts, with the video feed being observed by the auditor. The auditor can direct the client staff where to direct the video feed, and instruct the client staff to open containers to view the contents as deemed necessary. For larger inventories or outdoor inventories, drones can be used to provide a video feed.
Addressing potential inventory obsolescence is particularly challenging when auditing remotely. Consider viewing a video feed of the client walking through each aisle of the warehouse. Any items that look to be slow moving should be considered for further testing.
Performing audits remotely require careful consideration of how changes in the environment and changes specific to each client will impact the audit approach and procedures. Increased and creative use of technology to overcome these challenges is necessary to continue to perform quality auditing.