With government regulations in place restricting travel, and as more and more employees continue to work from home due to COVID-19, both business owners and auditors are having to change the way they approach annual audits. In essence, the current environment is requiring a move towards remote auditing, even if it is just temporary.
Remote auditing allows auditors to continue to offer clients the highest level of service in a proper, professional and safe manner. Remote auditing may appear to be a short-term substitute; however, it has been performed for years, just on a smaller scale.
What does a remote audit look like?
A remote audit is an approach that permits the client and auditor to interact virtually and allows for more of the audit fieldwork to be performed in separate physical locations using technology. The process is similar to traditional on-site audits: a timeframe is set for the audit to take place, the auditor requests documentation and asks clarifying questions, and the client needs to be available to provide requested items and answer questions in a timely manner. The difference is that all communication is done virtually: via video and phone calls, emails, and secure document sharing programs, instead of face-to-face communication and paper documentation.
How to prepare for a remote audit
Communication and preparation are two primary necessities of a remote audit, required from both the auditor and the client. First, the client must communicate to their staff and appoint certain individuals to be on call to answer questions and provide requested documents in a timely manner to the auditors. They also need to communicate with their IT department the dates of the audit, ensuring they are available during these days in case any network or technological issues arise.
The client should communicate with the auditor, prior to the audit, informing the auditor of personnel they should contact for various documents and requests. If possible, the auditee should provide the auditor with the trial balance and general ledger detail prior to the first day of the audit as well. This allows the auditor to know what areas will require more or less work, create a specific and efficient audit plan, and send an initial request for information, before the audit begins, which can reduce "waiting time" on the first day.
The client needs to communicate regularly on the status of auditor requests. This can increase efficiency and reduce total time spent on the audit. An auditor will send the client multiple request lists throughout the course of the audit including documents to send and questions to answer. If the auditor places priority on certain tasks, the auditee should do those first. If priority is not stated, the auditee should start with tasks that will require the least amount of time to complete and send those documents or responses back to the auditor; and then proceed through the rest of the request list. If you note items that will take a long time to complete, inform the auditor of this so they know the task is in process, and they can plan to move another section of the audit forward in the meantime.
Certain documents can be gathered prior to the audit, allowing the auditor to get a jump on some substantive work, and providing time for the client to gather required documents. Some of the most common required documents an auditor will ask for in any engagement include:
- Listing of all cash accounts for the year, noting any new or closed accounts
- Year-end bank statement and reconciliations for major cash accounts
- Accounts receivable detail as of year-end
- Accounts payable detail as of year-end
- Capitalized assets detail, noting the additions and disposals of the current year
- A detail of all activity for the year in all equity accounts
The major difference of a remote audit is how the client provides the auditor with requested documents. It is best to provide documents in the Microsoft Excel format whenever possible, as it can save time the auditor may have to spend converting the format to use for analytics or testing. If a workflow management software is used, such as Suralink, one can upload documents directly where the request is listed. If this method is not used or preferred, email is just as effective. When sending multiple items and documents, it is best to create a compressed (zip) folder, and either number each document to match the request list or name each document with key words associating it to the specific request.
Remote audits are a useful tool for both auditors and clients in this time. They are a developed process that will save time and provide an additional level of safety and social distancing for everyone involved. Communication and preparation will make the remote audit more efficient, and allow flexibility of time regarding work hours if intentions and expectations are communicated early on.
Please reach out to an HHM CPAs auditor if you have any questions.