The Pros and Cons of Virtual Auditing
Audit and Accounts Semi Senior Douglas Huth shares his views on virtual auditing 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.
The benefits of undertaking audit engagements virtually
With challenges come 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 cutting costs and giving 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 and are helping clients become 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 – benefits both very helpfully passed on to the auditors.
Also worth considering are the logistical advantages of virtual audits: 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 be noticing the benefits through reduced workload and will very much appreciate the introduction of flexible and remote working.
Drawbacks of undertaking audit engagements virtually
However, there are some drawbacks to virtual auditing: 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, and in my own experience it has proven challenging to get the same level of detailed insights.
As well as this, the implications on cash flow of the COVID-19 pandemic for companies will likely not be positive. Considering the current financial climate, not all companies are in a position to invest in new (and potentially expensive) computer equipment to provide flexible working opportunities to staff and connect them sufficiently so as to continue company operations. Improvements in auditing and internal processes aren’t guaranteed even with technological upgrades, as staff may be reluctant or unwilling to adopt new policies and any new potential efficiencies may not be achieved. Fortunately however, this appears to be the minority and most audit clients are adapting and reacting quickly, investing well and generally improving their procedures whilst reducing administrative burdens.
Training and development
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. Auditor staff will also not develop as quickly working virtually, as 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 – so that both parties can get the maximum out of the engagement.
How does the future look for auditing?
It is also important to consider what the future may bring for audit engagements. What will the future of auditing look like? A regression back to more comfortable and simpler methods? A complete overhaul in standard procedures and fully virtual audits becoming the standard? A hybrid approach combining the best of both worlds? My preference would be something more like the latter – with virtual 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 audit work to take place, however this has eased on the virtual audits I’ve led recently.
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.
But, as most companies will have noticed, the benefits of virtual auditing and flexible working open many 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.