Like any other profession, accounting and auditing had no exception in getting affected by the COVID-19 pandemic globally. It has changed the way professionals interact with and deliver services. However, the meaning of an audit remains the same, it is conducted regularly, and the auditor’s opinion depends on the previous data.
This comprehensive guide discusses how COVID-19 impacted audit services and how businesses cope with the challenges.
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How has COVID-19 changed audit services globally?
● Auditing during the pandemic
COVID-19 has dramatically impacted the financial market globally, affecting different entities, including accounting, internal control, and auditing, among others. Businesses faced difficulties with supply chain breakdowns, staff shortages, office shutdowns, a decline in demand, liquidity issues, business continuity issues, etc. Similarly, auditors faced problems performing audits, gathering relevant audit evidence, and concluding fact-based opinions.
The pandemic forcibly imposed numerous changes, like the rapid adoption of technology, working from a home office, and more. During the period, some of the significant risks were:
● Performing manual processes online or conducting audits via video conference was not easy.
● Sudden digital transformation made some auditors feel uncomfortable with their working abilities.
● Some firms had to accelerate the digital practices for ongoing quarterly and annual reporting.
● Risks related to instructions that don’t comply with the law and accounting standards
● Risks associated with reviewing accounting estimates.
● Attending physical inventory counts.
● Fraud and material misstatement risks have been observed.
Though the pandemic brought new risks, the accounting standards haven’t changed. There have been specific significant changes in the internal controls due to remote work arrangements.
During the pandemic, businesses were susceptible to fraud and cyber security attacks due to resource limitations and reduced employees, making designing proactive controls more difficult.
● The landscape of Audit in the post-pandemic world
Audit service post-COVID-19 relies more on technology and is adapted to the new normal of receiving and processing data. Though the potential of the existing technologies was known by the auditors for years, the pandemic and physical limitations accelerated their usage.
Established organisations started digitising their documents before the pandemic, while small-scale businesses were beginning or midway through the process. However, covid-19 compelled every company to adopt a new approach to auditing and cloud-based data extraction technology. As cloud computing technology develops, the way data is stored and managed in the cloud must be protected by new controls to avoid fraud and potential risks.
Most face-to-face meetings can now be conducted over video conference using video streaming technology that eases the audit process and saves time.
The covid-19 effects made internal and external audit processes focus more on emerging risks and their possible impacts. Auditors in London are adopting technologies and methodologies to assess risks with greater frequency continuously.
What’s more? Internal audits don’t have to be in a traditional office setting, as auditors are now efficient with technology and help businesses from home or any part of the world.
However, adopting the latest technologies will ensure good quality audits, more effective audits, and better business insights than traditional procedures.
What are the new challenges for an auditor?
For decades, auditing depended on established principles, and sudden changes in the approach can be challenging for auditors. Businesses must digitise their documents to conduct a remote audit process and use practical tools to ensure minimal disruption.
Businesses need to adopt secure cloud computing technology to allow clients to share their data without worries, no matter what type of audit is conducted. So auditors must know the use of such technologies and cloud-based platforms.
Furthermore, auditors must invest in machine learning and artificial intelligence to gather data-driven business insights. These professionals need to know the use of cognitive technology to analyse structured and unstructured data that were previously impossible.
Firms must adopt data extraction, analytics, and AI tools to virtualise the auditing process.
The new auditing duties may include
● Provide effective feedback to the top management
● Perform adaptability test of new technology
● Give continuous input to improve processes
● Improve operational standards
● Proper implementation of standard operational processes
● Create awareness of information systems security and cybersecurity
The new auditor’s roles include:
● Ability to plan and execute an audit process while keeping a bigger picture in mind
● A holistic approach to understanding businesses
● Interdisciplinary approach to audit
● Ability to efficiently integrate adaptability into audit designs
● Ability to enhance focus on critical areas to improve assurance
● Ability to use data mining processes to analyse data
● Ability to learn using the latest technologies like cloud computing, artificial intelligence, robotics automation testing, cognitive computing, and more
● Ability to predict future challenges
● Ability to consider a business-centric approach
Some of the challenges that auditors can face in the new normal world of auditing include:
● Understanding the changing business complexities and its operations
● Adapting new technologies from the beginning
● Understanding the latest auditing tools and methodologies
● Adapting to the need for agility
● Ability to address regulatory compliance in a changing landscape
Auditors need to increase their experience and expand their abilities besides upgrading to new policies, procedures, and technologies to combat the growing difficulties and dangers of the ever-changing auditing landscape.
However, by gaining awareness and knowledge of new technologies, internal Auditors can efficiently address existing and new risk areas and provide opinions to assist in making sound business decisions. They can confidently give deeper business insights resulting in increased audit value.
Audit in the post-pandemic world has accelerated the adoption and use of the latest technologies that other industries had already used before covid-19. More advanced technologies and innovations will increase the quality of audits, but they cannot replace the human judgment factor.
The auditor’s creative insights, skills, knowledge, and expertise still play a significant role in the audit process, supported by the latest technologies.
The future of audits will include better business insights and understanding, higher quality services, and improved business value. The role of auditors will in no way be replaced; instead, AI will automate the manual work involving large amounts of data analysis and other mundane tasks. You can look for some of the professional auditing firms using the latest technologies and have experience working in your industry to conduct business audits while you focus on core business operations.