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With the ongoing logistical challenges created by Covid-19 and safety protocols over the preceding months, the audit process during lockdown has become increasingly problematic. Worksites are closed, or only open to certified staff, and audit teams are unable to visit clients’ premises to complete the required audit work – so how do you get your audit completed?

The good news is that a new kind of hybrid audit approach is evolving, using the twin drivers of cloud technology and remote working tools to allow audits to take place.

Paul Hodgett explains how Haines Watts’ audit teams have reacted to the Covid challenge, and how they are now offering a tech-savvy, customised audit approach for their clients.

 

Carrying out an audit in 2021

There are two sides to the audit challenge in 2021, and both of them are changing the ways in which we interact with owner managers as their auditors and accountants:

  1. Firstly, having a third-party audit is more important than ever in our current situation, with so many financial pressures on owner-managed businesses. Having access to a third-party independent auditor is critical during the ongoing crisis.
  2. Secondly, there’s the question of how audit can evolve and change to meet the logistical hurdles lying in the way of getting the physical audit work done during lockdown and restrictions.

You have a situation where all your teams are working from home, or off site. All the usual oversight structures you’d have as an owner or MD are no longer there. With staff working from home, we’re all working more independently and the checks that were in place previously may not be there anymore.

You may have 20 people working in 20 different locations, with no overview of how they’re working. So, having someone objective to check over the process and numbers is more important than ever.

 

Using tech to create a more innovative audit

Covid presented challenges last year, and will no doubt continue to be so in 2021. We have had to be agile and creative to adapt, like carrying out some stock takes via Zoom video calls, with the client’s people in warehouses, walking around with a phone in their hand and us telling them where to go and what to count. They are our ‘hands and legs’ and the phone becomes the ‘eyes and ears’.

We have a client in the US where usually someone would travel there to do the physical audit work in person. But it’s all been done via Zoom and working remotely this year.

So those are the two big conflicting issues we’re looking at: audit being more important than ever during this crisis, but how we (as auditors) can get the work done, going forward.

 

A move to a hybrid audit process

If we look back to the pre-Covid audit process, auditors used to go out to client sites, and do the work alongside client staff. Where we are now, it’s all having to be done remotely, to meet the best safety protocols.

But what should people expect going forward? Will this change permanently? In my view, audit is probably going to change to work via a hybrid model.

The advances in technology and ways we’ve developed to use them remotely in the audit are here to stay and can make the audit more efficient. However there are dangers to working remotely, like when auditing a stock take, and you don’t get to see what else is going on in the warehouse that might inform the audit. So, it’s not perfect as an approach.

I also think that remote working will erode our understanding of our clients businesses which is key for a good audit and discussing complex or difficult issues is easier face to face. So we will go back to doing some work in person when it’s safe to do so.

 

Getting inventive with the available technologies

I think the tech will get increasingly important in running a business, with cloud-based accounting platforms like Xero being at the heart of what we do.

By moving clients to a cloud platform:

  • We can get access to a client’s accounts and interrogate this ourselves.
  • We don’t need the client to print as much information or send data.
  • We can access financial information in the cloud on our own laptops from home.

With businesses that aren’t yet in the cloud, we have got clients to show us documents on Zoom when they are working from a paper-based system. However, it’s time-consuming both for clients and auditors because you need two people, one on screen showing the information and one documenting it for the audit.

Even when working remotely we may sometimes need to see physical records. Our approach has been to store up these requirements across all areas of the audit and then send one person for the minimal amount time to do it all at once, so only exposing one person. We do have policies and safety structures in place to see what the client’s Covid protocols are, so we protect our team and protect their staff. We always want our people to work in a safe environment – that’s essential.

We’re having to come up with new ways of doing things, being more innovative and making people think about what they do and how they do it. That’s been a bonus of having to rethink our approach.

 

Building a great relationship with your auditor

One thing that won’t change is the need for a good client relationship. Although we have to do all the work to meet auditing standards, a good audit is run by a partner and team who understand their client’s business. And to do that you need to meet business owners, get to know them and see how their business works on a day-to-day basis.

That’s where a good quality audit comes from. Issues are usually found when following something up that comes from these conversations – so you can lose some of this insight when you don’t see how they operate on a day-to-day basis. You get a lot of knowledge from those observations and clients will get an additional benefit from a hands-on audit.

I think people will want to come back to the office at some point. Not necessarily full time, but they will want to come back for the social interaction. I don’t see our teams coming back to the office full-time anytime soon. They may be coming into the office three times a week, so the need for the tech may reduce as we get through the pandemic.

 

A hybrid future that delivers custom audits

I do see a hybrid model coming in over time. You’re likely to have audit teams visiting the client’s business for a couple of days in the middle of the audit to do the face-to-face work, then moving back to the office, or home, to complete the work remotley using our cloud and video tools.

The big challenge we face is getting to know the key people and understanding how the business works while spending less time physically in their offices. It’s that overall knowledge of the people and company that you lose by going remote.

When people come out of Covid, I think we are going to want to interact with each other – and that will mean more meetings and more face-to-face time. Where you have a team of people, juniors on the audit teams do a lot of learning and gaining experience from being on site and working with senior staff, so it’s important that we can get back to this in some form.

We’re likely to see:

  • Physical audit teams working together in the office visiting clients as required, with safe social-distancing protocols in place – once it’s safe to do so.
  • More use of cloud accounting and remote working tools, so we can carry out the audit work from any location – whether it’s the office, home or at the client’s workplace.
  • More emphasis on getting to know our clients and finding out what makes their business tick – and making sure we do this both face-to-face and remotely.
  • A greater focus on customising the audit approach to fit the needs of the business and the owner, with more custom processes in the mix.

 

Working with an innovative team of audit professionals

Auditors now have a greater set of tools to tailor the audit and make it fit the client’s exact specifications. This custom audit process is at the heart of the Haines Watts’ approach.

Audit is no longer a one-size-fits-all methodology.  We deliver that customer service and use the cloud tools and video tech in a beneficial way to create a tailored, hybrid audit process that’s specific to the needs of your business.

If your auditors are being inflexible, come and talk to us. Our audit team is flexible and innovative, allowing us to deliver the quality audits that our clients are looking for.

Find and contact your local Haines Watts office

About the author

Paul Hodgett

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