By James Hadfield, an audit partner at accountancy firm, Menzies LLP.
Many business processes have changed during the pandemic. Cloud-based document sharing and communications platforms have become essential to ensure efficient working. For audit teams, this has meant a shift in the way they operate while they are not able to carry out face-to-face site visits.
While the fundamental principles of auditing remain the same, the processes used to gather and assess information have evolved significantly. Although this has brought some logistical challenges and a rise in audit risk related to fraud, many audit teams have also found benefits to the new way of working. Use of the latest technology and document sharing platforms for example, has helped to improve efficiency in some areas, while providing greater assurance of data security and GDPR-compliance. In other areas however, feedback from audit teams has been more mixed, so has audit changed for good?
Despite some initial concerns about whether audits could be done remotely, the industry adapted quickly when the pandemic hit in February last year. Use of the latest communications platforms and other technology, allowed audit teams to conduct interviews and remote walkthroughs and in some cases, they proved more efficient than expected. However, the lack of on-site fieldwork during the pandemic has reduced transparency and made it more difficult for auditors to pick up on the nuances and snippets of information that are typically gleaned from site visits and face-to-face meetings. As well as presenting challenges for the audit team, this can disadvantage the client business, as opportunities to add value through spontaneous conversation might be lost.
Technology has been a vital tool in supporting the role of audits during the pandemic. E-signing and e-filing software has boosted the efficiency of some processes by removing the need for physical documents to be shared, signed and scanned. However, the prevalence of remote working has increased the risk of cyber-attacks. With teams geographically spread, using unknown network connections, the need for IT risk assessments has become more important than ever to protect business information.
Despite significant technological advancements, there are concerns that audit processes take longer and have become less efficient overall. In the past, an auditor would be left to their own devices to retrieve the information they need from onsite filing cabinets. Under the lockdown restrictions however, they have to rely on business owners to source and send the required documents. For clients still operating paper systems, this requires a significant time investment and if errors arise, the time needed to resolve them can slow things down further.
To alleviate the time pressure that companies and their auditors are facing, the Government initially provided a three-month extension period for businesses to file their end of year accounts. This additional time was intended to allow extra care to be taken, to ensure the International Standards on Auditing (ISA) were being adhered to. This extension ceased to apply for year ends after 30th June 2020 however, and businesses and their auditors must now deliver reports on time.
Often audit teams utilise trainees to perform detailed audit fieldwork. In some ways, remote working has made it more difficult to provide on-the-job coaching and peer support, which could in turn be creating a bigger problem for the future. Firms will have to plan with this in mind, ensuring that sufficient resources are made available to develop and catch up these trainees in the future.
Despite these challenges, the industry has shown considerable resilience and proved that remote auditing is possible. Whilst many firms were already implementing technology and upgrading their systems to improve their flexibility, the pandemic has accelerated this by making it a necessity.
It is likely that auditors and their clients will find a hybrid way of working in the future. However, ongoing training support to strengthen certain skills and introduce teams to the latest systems and software will be needed. Flexible working is reliant on communications technology, so it is vital that teams are competent in using such tools, as well as other systems including cloud-based client portals.
At the same time, with advances in accounting and audit software the use of data analytics in audit is becoming far more prevalent. Although this is a good thing and will help auditors to gain a deeper understanding of how businesses operate and their financial performance, analytical skills will become an essential part of the audit role in the future.
Increased flexible working probably represents the biggest permanent change for the industry. Remote working has created an opportunity for auditors to benefit from better work-life balance by controlling when and how they work. It also means firms have a larger geographical pool of talent to recruit from. This could be very positive for the audit profession, helping to encourage new entrants at a time when they are most needed.
With the Government's roadmap to recovery in place, there will be an opportunity at some stage for audit teams to resume face-to-face meetings and site visits. While such contact has been missed and is likely to resume, finding a new hybrid way of working will mean audit teams can also work from home where possible.
Overall, the pandemic has been a time of significant innovation, with the audit profession demonstrating its resilience and agility. Whilst the fundamental principles of audit will remain unchanged, the rapid onboarding of technology has brought with it some key benefits in terms of flexible working. Making the most of these changes will be vital in safeguarding the future of auditing and welcoming new talent.