ACCOUNTANCY ACADEMIC SEMINAR: AUDITING AND ASSURANCE IN THE NEW NORMAL
Planning
Change in risk assessment i.e. accounting, controls, audit procedures and audit evidence
Change in audit approach
o Virtual inventory observation
o Third party confirmation
o Fraud risk evaluation – working remotely, electronic evidence, less personal interaction
o Internal control evaluation – changes in procedures, people, client-evidence/precision and
completeness of operations over a population (i.e. JE review, SOD, review controls)
Contingency planning – engagement team member or client contacts getting infected at critical times, how
to assess safety, audit work, and minimize impacts and have a Plan B (i.e. divide team to Team A & B)
Execution
Physical inventory observation
ISA 501. Audit Evidence – Specific Considerations for Selected Items requires the auditors to attend
the entity’s physical inventory count, unless it is impracticable. If the auditors believe it is impracticable,
they still need to obtain sufficient appropriate audit evidence about the existence and condition of the
entity’s inventory or they will be required to modify the audit opinion.
Situation:
In situations where the entity will conduct a count but the auditors may not be able to attend the entity’s
physical inventory count because of restrictions placed on the auditor’s access to the site(s).
Alternative procedures:
Post balance sheet date observations with roll-back procedures
Leveraging inventory count observation evidence from earlier in the audit period and performing
roll-forward procedures
Increase inspection evidence for cycle counts
Using internal audit to perform the observation
Virtual inventory observation
Confirmation procedures
ISA 505. External Confirmations requires, among other things, that auditors maintain control of the
external confirmation process and that we evaluate the authenticity of confirmation responses.
Situation:
If the auditors and client are working remotely, obtaining the signed confirmation requests from the
entity so that auditors may control mailing to confirming parties.
Alternative procedures:
PwC Confirmation System
Additional procedures to validate authenticity of confirmation
Reliability of information
Situation:
When auditors are not permitted to enter the client site, they may need to obtain scanned versions of
third party documents (e.g., vendor invoices) that they use in substantive or controls testing, through
electronic means e.g. email.
Where the volume of non-original documents used in the audit increases, the risk is higher when
evaluating the authenticity of these documents, we can select a sample from the documents used in the
audit and arranging to obtain the originals so that relevant details can be agreed to the electronic
versions.
Completion
Going concern
We should expect that many entities will encounter impacts resulting from coronavirus and actions
taken to prevent its spread that will challenge their ability to continue operations without taking
significant mitigating measures and we can expect that, unfortunately, some of these entities will need
to cease operations.
While the relevant ISA requirements detailing the required risk assessment procedures and response to
assessed going concern risks remain unchanged, it is important that auditors remain alert to the new
events or conditions that may cast significant doubts over the ability of the entity we are auditing to
continue as a going concern.
Management’s responsibility
To make an assessment of an entity’s ability to continue as a going concern
Auditor’s responsibility
Obtain sufficient appropriate audit evidence regarding the appropriateness of management’s conclusion
about the use of going concern basis of accounting and to independently conclude whether a material
uncertainty about the entity’s ability to continue as going concern exists.
People
Supervision and review while remote working
Enhanced engagement with junior staff
Create connectivity with team and client – reduce stress
Shorten meetings
Create personal breaks and understand home/family breaks to recharge
Identifying lower utilized team members for micro assignments and task shifting
Project management
Huddle meetings
Calendar-ize everything – conflict resolution at the start and plan everyone days with time to work/meet
Client engagement – remote impact and enhanced status updates
Escalation protocols