Preparing for the COVID-19 Year-End Audit

For F&A professionals, the pandemic has made one thing glaringly clear: there’s never been a more compelling time to take on digital transformation. But, how will this shift the way Accounting runs, operates, and affects other stakeholders? Particularly those whose work revolves around F&A?

In a recent webinar, BlackLine polled over 700 audience members to learn how Finance and Accounting and related teams have been affected by recent challenges. More than 40% of respondents said that closing virtually with a distributed workforce will have at least some impact on the audit and other third-party engagements.

This made me wonder, given that Accounting and Audit are so tightly coupled, how will changes with Accounting ultimately affect Audit?

To answer this question, I found three articles that discuss top of mind audit risks, recommendations for remote audit, and new audit guidance.

This Journal of Accountancy article discusses four areas auditors should consider as they prepare for clients with 2020 fiscal year ends.

First, because organizations have shifted from the office environment to work from home, auditors should question whether their clients’ relevant controls have changed. Auditors may find that they need to conduct two evaluations of design—one for controls that were in place before the pandemic and another for controls put in place after it began.

Second, COVID-19 has created the “perfect storm,” and auditors should be on high alert for fraud risk. Employees may have been tempted with the unfortunate mix of incentive, opportunity, and rationalization.

Third, with the rapid rollout of and participation in various forms of federal economic stimulus funding, there may have been inadvertent noncompliance with laws and regulations.

Fourth, auditors should also consider heightened risk around accounting estimates, especially for revenue recognition.

Read the full article on JournalofAccountancy.com.

This article by Deloitte explores three insights and remote auditing techniques in the wake of the pandemic.

First, Deloitte encourages organizations to focus on what matters. They highlight the importance of well-practiced project management, processes, and technology capabilities—much of which is enabled by using cloud technology and agile principles.

Next, auditors should look to make work portable across time and space.

Even though many organizations have tools for virtual collaboration, organizations need to think beyond the infrastructure for remote work and enable the very future of work itself. This includes a renewed emphasis on digitization and developing a good data strategy.

Lastly, leaders and peers should consider the human side of digital remote work. Auditors can ease the transition to virtual work and strengthen client relationships by respecting boundaries and promoting well-being.

Read the full article on Deloitte.com.

A recent article by Accounting Today highlighted the AICPA’s new standard on audit evidence, SAS 142. The AICPA’s goal is to modernize auditing standards and make them more relevant in today’s world, especially as the use of technology increases.

Digitization has made more information available to auditors. So, the new standard focuses on understanding what criteria and factors should be taken into account to assess whether the information is sufficient, appropriate, and meets the requirements of U.S. auditing standards.

In other words, with a larger volume of evidence, auditors should make sure information provided actually addresses the control.

The new standard also promotes an understanding of whether information corroborates or contradicts management assertions. Instead of just confirming supporting evidence for each management assertion, auditors are encouraged to consider whether evidence violates any other assertions.

As pandemic circumstances continue to change, this remains consistent: the companies that adapt and improve their business to be better prepared for the future will emerge from this crisis better positioned than those that have simply maintained the status quo.

Visit our Virtual Close Hub to learn more about how you can become a better business partner and prepare for a successful year-end audit.