Audits are a fact of life, but it’s very rare for an audit team to finish up the exercise and say, “well, that was easy!”
Audits can be a painful ordeal and a recurring burden for accounting teams. And when organizations around the world shifted to a work-from home model a few weeks ago, F&A teams had very little time to prepare.
The challenges facing auditors right now will be determined by where they and their clients are in the scope of innovation, and the importance of implementing technology to speed up audits is becoming painfully evident.
They span from being able to access basic information or conduct your audit or quarterly review all the way to being able to attest to or assess the accuracy of the financials, which is an entirely different ballgame.
The Challenges of a Virtual Audit
Many external auditors have an audit innovation practice and may have already been pushing to revamp the traditional onsite audit.
To deal with the unexpected pressure and urgency they’re now feeling to complete audits virtually, they may accelerate the process by using AI and RPA to dig through data—rather than manually doing a test of 25 invoices by pulling out the invoice and proving that it was received, got coded, was approved, and paid.
It’s just as critical for F&A teams to have the right technology in place. Use this question as a starting point: can you load your entire AP file into the external auditor’s database where they churn through it and find those anomalies to discuss?
If not, it’s time to begin exploring the technology that can get you there.
Here are the top three challenges organizations are currently facing as they transition to a remote audit, and why technology is the solution.
Communicating Up-To-Date Information to the Audit Team
Prior to the pandemic, there was typically an onsite portion of the audit, if it wasn’t done entirely onsite. Auditors would be physically present to conduct their walkthroughs, approach the F&A team directly to get the latest trial balance and ask questions, and collect PBC items for review.
Now, teams must operate in a completely virtual environment. Those who haven’t implemented secure processes to transfer sensitive financial data to their auditors are scrambling to prepare for this new reality.
Technology Introduces Transparency & Trust
Transparency builds trust. Auditors love it when they can easily assess the who, what, when, where, why, and how behind any account balance or journal entry.
The hassle of back-and-forth exchanges and piecing together details is replaced by confidence that information is documented and accessible in a single location.
Transparency and trust extend across all levels of both accounting and audit teams, from staff to senior executives. It’s a win-win relationship that pays dividends well beyond the COVID-19 crisis.
The auditor can serve more as a strategic advisor, better able to help the organization understand and comply with complex accounting regulations.
Finding Time for Higher-Level Analysis
Accounting is now spending more time analyzing how the COVID-19 pandemic will change key assumptions that potentially impact financial statement line items.
- What is the potential impact to the company’s revenue?
- What is going to be tied to the expenses of the company?
- What do we need to reserve for certain revenues?
This means that auditors will also be spending more time reviewing these assumptions, and what both groups desperately need to accomplish this additional task is more time. But time is limited for organizations who are still in the weeds of manual tasks.
Technology Saves Time
Modern technology for financial close automation enables more efficient audits. With everything stored and accessible in a single cloud solution, both staff and auditors have a unified place to request and provide PBC items, as well as monitor status.
Rather than recurring meetings to hash through a list, both parties can readily see what’s done and what’s in progress. And better yet, supporting documents can be attached to their corresponding request.
Increased Cost Due to Inefficiencies
No one wants to deal with unexpected fees that can creep up during the audit, especially right now when the economic outlook of the world is uncertain. The inefficiencies associated with figuring out how to manage a remote audit, scanning in documents, or manually shifting through large amounts of data or transactions typically come back to Finance and Accounting as overage fees.
Technology Saves Money
Manual processes are error prone. If auditors find errors, they may proceed with additional sampling that can trigger unexpected fees, as extra testing is outside the anticipated scope.
Technology limits the risk of error and provides best practices and segregation of duties “out of the box.” As a result, auditors may focus on testing IT controls or reviewing configurable business rules rather than performing extensive sampling and detailed testing of transactions.
Stress and anxiety don’t need to be a part of the audit process. Companies that utilize financial close technology move through audits faster and with better results, and they have stronger, more transparent financial management throughout the year.
Read this white paper to learn more about how technology enables an efficient and smooth remote audit.