THE IMPACT OF COVID-19 TO AUDITING SERVICES

Audit Planning

Independent auditors play an important role in the financial reporting disclosure by providing independent audit opinion on the financial statements. With the presence of COVID-19, auditors are refrained to meet up with the client or other parties to obtain audit evidence. The auditors also need to reassess the audit risk since there has been an economic downfall since the pandemic. Audit planning will now consider several alternate procedures due to the company’s change in internal control. Such procedure stated by ICAP (2020) may be assigning more experienced staff with special skills, or are experts in the field, providing more supervision during the auditing, inputting new factors that may affect the internal control, and making general changes to the nature, timing, and extent of the audit. Auditors are required to understand the impact of the pandemic to the client’s business, whether it will affect negatively or positively. Auditors are also required to strategize how they would communicate with the client. Auditors also need to change their threshold on materiality due to the pandemic, because there might be more material misstatement caused by changes in internal control. Auditors may also need to consider putting more resources to obtain audit evidence, ensuring the correct information to be given.

The assessed risks also need to be revised since there will be an increase in audit risk during the pandemic. The auditors need to be responsive to several factors that may indicate increasing risk. Several factors may increase the risk of an audit such as difficulties in confirming balances in the financial statement, attempts by management to intercept or alter confirmation requests or response, unusual delays in documents produced by manager when requested by auditor, inconsistent, vague, or incomplete information and responses by management, and relationships that problematic between client and audit team. Auditors may follow what they have planned previously, however some changes need to be made in order to ensure that the information or evidence can be verified.

Audit Objectives

During this pandemic, auditors will find difficulties to obtain evidence relating to existence, completeness, and accuracy audit objectives due to the social distancing program. Auditors will find difficulties in obtaining evidence that usually requires the physical presence of the auditor and they can only rely on technology to obtain the evidence online.According to ICAP (2020), extra efforts are required by both the auditor and the client, inventory count can be done through video conference with the client doing the inventory count and the auditor watching and discussing with the client on what to check. Clients can also send records of employees entering and exiting the warehouses and verify with inventory count as well as logistics process. To put it simply, most work that requires the auditor to be there physically will be substituted by the client with several supervisions. This procedure is important to ensure existence, completeness, and accuracy are in place. 

Audit Procedure

Audit procedure during the pandemic should be altered due to the social distancing. Most of the procedures will now need to be conducted either online or remotely. What is meant by remotely is by using a drone for the auditor to control remotely from his location to do physical examination at the client’s company. This may ensure independence for the auditor which will produce a valid audit opinion for the public. By making most of the physical procedures use drones, the auditor and the client will stay safe from the pandemic that is occurring. Furthermore, auditors may be required to confirm more than usual since they are not able to come and confirm for themselves. Websites such as confirmation.com helps auditors to confirm balances at the cost meditiary payment. This way, an auditor can confirm a client’s bank balances through the internet without even leaving their bed.

Audit Testing

Audit testing involves the test of control, substantive test of details, and analytical procedure. During this pandemic, audit testing should be more of a concern to the auditor since the auditor wants to provide the users the correct audit opinion even though with the limitation of not being able to be present at the location. 

Focusing on the test of control which an auditor needs to be present most of the time to do either reperformance or observation. The auditor and client can use Microsoft remote desktop to do the reperformance or use screen sharing to observe how the company system of operating procedure runs. This allows the auditor to test the assessed risks and verify the auditor’s assessment.

Audit Report

According to PCAOB (2020),”The COVID-19 crisis may affect the auditor’s report, such as when the auditor is determining and communicating critical audit matters (CAMs).“ Hence, PCAOB has provided several guidelines for auditors to follow. Some guidelines may be to require the management of the client’s company to provide the auditor with a revised report regarding the company’s going concern, incorporating new or revised accounting estimates, performing impairment tests or making additional disclosures in the financial statements.The auditor also needs to cover the impact of COVID-19 outbreak in the audit report to be used as evaluation of the economic meltdown and interruption caused by the virus on the financial statements. This is to ensure that the readers understand why the figures, procedures, and threshold of materiality is not the same as usual and is actually caused by the pandemic.