The Pros and Cons of Virtual Auditing
Audit and Accounts Semi Senior Douglas Huth shares his views on remote auditing advantages and disadvantages during the COVID-19 Pandemic and beyond.
The COVID-19 pandemic has meant new and exciting challenges for the field of company auditing. With the vast majority of British companies affected by local or national lockdowns, isolating staff and supply chain disruptions, it has become necessary for auditors to work more flexibly around their clients. This is where virtual auditing has come into its own.
The benefits of auditing virtually
With challenge comes innovation. Most of the audit clients I have worked on over 2020 and 2021 have adapted significantly, either through technological upgrades or new internal procedures. Most have also largely transitioned into a permanent ‘work from home’ routine for the majority of staff. In the process, this has cut costs and given staff the benefit of flexible working.
In addition to the workforce changes, new software and hardware acquisitions have been implemented across many of our audit clients during the pandemic. One of the advantages of auditing virtually is that clients are becoming more efficient and consistent in their internal processes. Even simple changes, such as virtual invoice storing on the cloud and electronic approval of purchase orders, are massively benefiting both the internal procedures and documentation. These benefits have both very helpfully passed on to the auditors.
Also worth considering are the logistical benefits of auditing virtually. Neither auditor nor client staff have to arrange for travel and accommodation, reimbursement for these and other expenses and cover for personal absence at the office and at home. Both client and auditor admin staff will appreciate the advantages of auditing remotely, through reduced workload and the introduction of more flexible working.
Remote auditing advantages and disadvantages
It’s important to weigh up the pros and cons of remote auditing. As well as many auditing benefits there are some drawbacks to a virtual process. The main one being that audit staff will not experience the same connections and will not develop as detailed an understanding when undertaking a company audit as if it had taken place onsite. Through my own personal experiences, I have noticed a significant difference in how well connected I feel to both a client company and the staff. The audit staff will have to develop an understanding of the client without physically visiting them. In my own experience it has proven challenging to get the same level of detailed insights with virtual auditing.
In addition, the COVID-19 pandemic is unlikely to have a positive impact on company cash flow. Providing flexible working opportunities to staff and connecting them, so as to continue company operations, may be problematic. Considering the current financial climate, not all companies are in a position to invest in new (and potentially expensive) computer equipment.
Improvements in auditing and internal processes aren’t guaranteed, even with technological upgrades. Staff may be reluctant or unwilling to adopt new policies and any new potential efficiencies may not be achieved. Fortunately, this appears to be the minority and most audit clients are adapting and reacting quickly. Investing well, improving procedures and reducing administrative burdens are all positive advantages of e-auditing.
Training and development for virtual auditing
Another issue arises in the training and development of new client and auditor staff. Inexperienced client and auditor staff will take time to adapt to new technological demands. It’s possible that auditor staff won’t develop as quickly if working virtually. The physical disconnect between the client, the staff and the company financial statements may hinder relationship building (and as a result the quality of the audit engagement).
Another key issue to consider is the role of the auditor as an external advisor to the client. The COVID-19 pandemic has brought on many challenges, one of the key challenges being communication and social interaction both personally and professionally. In these unprecedented times, I’ve noticed the role of the auditor can very easily be simplified down to a necessary formality – a box that needs ticking. The value that auditors and financial advisors have to companies is currently locked behind a social barrier, one which many of our audit clients currently struggle to tackle. It is now, more than ever, up to auditors to remind clients of the services they have been engaged for, but also to offer advice and suggestions where appropriate. This will ensure that both parties can get the maximum out of the engagement.
How does the future look for virtual auditing?
What will the future of auditing look like? A regression back to more comfortable and simpler methods? A complete overhaul in standard procedures and virtual auditing becoming the standard? A hybrid approach combining the best of both worlds – virtual auditing and site visits where required? My preference would be something more like the latter – with virtual auditing resources available to the auditor and flexibility around client deadlines and staff availability.
One of the more frustrating aspects of planning an audit can be agreeing the timetable for the process to take place. However, this eases when done remotely – another of the benefits of auditing virtually.
Summary – assessing the pros and cons of remote auditing
Although things are improving with the rollout of international vaccination programmes and a slow transition back to normality for most office workers, spare a thought for your local audit firm. One of the best aspects of onsite auditing are the connections made with clients and their staff. Most audit clients I have worked with have now made significant technological and procedural changes in response to the challenges faced over the last 18 months or so. As a result social interaction on future audits may be solely through virtual means and may not feel as genuine. For auditors like myself that relish these in-person interactions with clients, this can be difficult to adjust to.
However, as most companies will have noticed, the benefits of virtual auditing and flexible working open new doors. As long as companies can find a way to maintain important social structures within their businesses, the pros will far outweigh the cons and they will hopefully thrive in a new, more modernised society.
If you would like to find out more about our company audit services, please get in touch with our teams in Brighton and Wimbledon.