Rachelle Thea D.

Cuenca January 28, 2021

BSA3 AUDIPRA3

Auditing Practice During Covid19 Pandemic

Despite of the COVID-19 pandemic lurking around the environment, disrupting our used-
to-be normal life, altering the daily activities, life goes on and so are the business world. Entities
will have to report on their operations and financial conditions during the pandemic. As a result,
these reports will still have to be audited.

Nevertheless, the global pandemic had entailed extensive pressure to auditors in finding
ways on how to collect audit evidence and complete the engagement. It is still a struggle if
auditor will still be effective and efficient during this pandemic. For instance, auditors rely upon
physical in-person evidence collection procedures, such as inventory observations, property,
plant and equipment assessment, interviews, and discussions.

To further elaborate, when it comes to the auditing process, an audit evidence is more
reliable if it is acquired from sources external to a certain company, if it is in documentary form,
or if it is obtained directly by the auditor. When an evidence is reliable and appropriate, the
sufficiency or quantity of evidence to be collected can be determined. The reliability and
sufficiency of audit evidence are necessary when auditors assess risks and design audit
procedures. As stated by Appelbaum (2020), even though the process of audit evidence
collection is enhanced by means of RFID tags for instance, it would still be necessary for a
physical presence to verify assertions of existence, occurrence, and valuation. Particularly in
today’s protocols of social distancing and quarantine, these are the areas of evidence collection
that put auditors into difficult situation especially when reviewing evidence collection
procedures which requires physical observation and complying with AICPA and PCAOB
requirements while they work.

According to Levy, auditors will have to exert considerable professional skepticism and
vigilance for any manifestation of biases in the management whether intentional or not.
Companies may use this crisis as opportunity to alter their statement of financial reports. Thus,
auditors should mandatorily be watchful and be attentive to circumstances indicating fraud risks
and material misstatements especially when the company have undergone a dramatic change in
its operations like revenue reductions, supply chain disruptions, business closures, increased
exposure to credit risk and increased costs.

In light of the worldwide crisis due to pandemic, on-site audits are necessarily replaced
by remote audits. Companies have shifted to remote audit as they adopt new technologies which
deliver improved operational and cost efficiencies. Therefore, auditing processes will have to be
performed off-site. To illustrate, the FDA published a “Remote Auditing Pilot Program” which
outlines a pilot program for remote auditing processes (McManus, 2020). By means of this
program, technology is used in facilitating this kind of audit process which includes
videoconferencing, secure fileshare repositories, web-based meeting systems with screen sharing
capability and remote “read-only” access to automated systems such as electronic quality
management systems (McManus, 2020).

With devices that provide live video streams or video recordings, it is possible that
auditors may still perform an “auditor first view’ inventory observation for instance. An audit
client’s employees may conduct an inventory count by means of a GoPro camera, or wearing a
Google Glass headset which can be in constant communication with the audit team (Levy, 2020).
In addition, the audit team can record these videos as a strong audit evidence of an inventory
verification. However, this is only appropriate when the subject matter is immaterial. By these
provisions, an auditor can satisfy the physical requirements of inventory observation and
validation at this time wherein the auditors can review the videos and magnified the scale as
often they desired.

Moreover, interviews and discussions as part of the audit engagement will have to occur
via Zoom, Skype and GoToMeeting during this time of quarantine. One of the limitations to
video conferencing is that auditors should be familiar with this kind of tool and should have
“waiting room” or passwords for meetings because control is very crucial given that discussions
could be sensitive and video meetings could be hacked if there is absence of proper security
access (Appelbaum, et.al, 2020). Communicating with the audit team will have to occur more
often using videoconferencing to maintain continuity concerning the engagement.

References

Appelbaum, Deniz (et.al). Auditing and Accounting During and After the COVID-19 Crisis.
CPA Journal. Jun2020, Vol. 90 Issue 6, p14-19. 6p. 2 Color Photographs, 1 Chart
Levy, Howard B. Financial Reporting and Auditing Implications of the COVID-19 Pandemic.
CPA Journal. May2020, Vol. 90 Issue 5, p26-33. 8p. 1 Color Photograph.

McManus, F. (2020). Covid-19, Fraud and Re-Evaluating the Role of the Auditor. Accountancy
Ireland, 52(6), 36.
Performing Remote Audits During the Pandemic. (2020). Pharmaceutical Technology, 44(7), 66