Auditing Challenges and Changes Post-Pandemicby
As a principal with more than 20 years of experience in audit and assurance, Mark Audi, CPA, had grown accustomed to the rhythm and workflow of the audit process. But in March 2020, he quickly realized how CPAs' work with audit clients and team members changed substantially.
In 2020, auditing professionals had a get-out-of-jail-free card in terms of dealing with the newness of remote work and its impact on personal and professional lives, but not when it came to producing the high-quality work we always do.
Like in so many other industries, these changes created challenges, but also opportunities to rethink the way we do business. I suspect many of these changes will prove to have sustainable benefits and will stick around even as restrictions begin to lift and we navigate the ever-changing landscape of a post-pandemic world.
Managing the Changes of Remote Work
Clients were understanding of the technological challenges we faced because they were also going through those same issues. Whether an employee was navigating a Zoom call for the first time, or a client needed some extra time to get us a document digitally, we all understood that these were growing pains in unprecedented times.
Well, in 2021, that free pass is gone. More than a year has passed since businesses were shut down due to COVID-19, and clients now expect us to have our ducks in a row and to seamlessly integrate our services into a hybrid platform.
Over the next six to 12 months, mastering this new approach and embracing various technological opportunities will be a powerful differentiator for auditors who do it well. I foresee many of the more routine aspects of the audit process continuing to take place remotely, and this has been validated by recent conversations with clients. I would estimate a good 60-70 percent of my clients will choose to have us conduct a significant component of their annual audits remotely.
That doesn’t mean there won’t be value in face-to-face meetings, especially to foster the client relationships that are so important to our business. The expectation for 2021 and beyond will be striking the right balance between digital and in-person client interactions.
Value in Different Interactions
Prior to the pandemic, a traditional audit would involve coordination of onsite fieldwork to perform significant phases of the audit, planning, interim and year-end procedures. For clients requiring physical inventory observations, another logistical touch point would likely need to be arranged as well.
During each on-site visit, there would be a healthy number of client meetings as we execute the information-gathering process, mostly with members of the company’s accounting department. Depending upon the size and complexity of the engagement, the pre-pandemic, in-person environment meant that most of our team members would be on-site for a varying number of days or weeks at a time.
As a partner, I had a structured schedule: catching up with my team, going through issues related to the audit, speaking with the company CEO or CFO and other miscellaneous items, if time allowed. This schedule often hindered our ability to interact in a meaningful way with employees from the company outside of the immediate finance team responsible for working on the audit with us.
The pandemic changed that. Once we adapted to virtual meetings, we began interacting far more often with various other parts of a company that produce information that impacts an audit.
We were in virtual meetings much more regularly with people working in operations, sales, FP&A, procurement, logistics and more. We developed a broader and deeper understanding of the companies we audit because we were able to conduct more comprehensive conversations with people directly involved in its day-to-day operations. At our firm, these types of conversations continue in 2021 and will remain, in some form, a part of our engagements. I believe this will add significant value moving forward.
Understanding Client Relations
In addition to the time incurred, there are inherent hard costs to performing in-person audits: travel, lodging and other incremental expenses. Most, if not all, of those went away in 2020. However, the time it took to perform the audit was either the same or more than before. It was hard to pinpoint why this was the case or to quantify it.
As a result, it seemed logical to blame the time-consuming nature of transitioning into a fully digital audit process. Our clients experienced it on their end as well – things just seemed to take longer.
There was a general feeling that the pandemic had an adverse impact on efficiency. As a result, our clients amicably agreed to evenly share in any incremental costs. I was never so proud and appreciative of the relationships my team and I built with clients over the years because I am not sure that would have been the outcome if it was not for those strong foundations.
In 2021, with more than a year of experience in the virtual environment, our clients now perform their monthly, quarterly and annual close procedures remotely and have the process under control. To complement that, we, too, have seamlessly integrated into their hybrid space.
We were prepared, we recognized some great efficiencies in the process and we completed our audits ahead of schedule. In those instances, we were in a good position to share cost efficiencies with the company as a way to thank them for their understanding of the cost inefficiencies of 2020.
The coming years will offer opportunities for innovation in how we embrace the hybrid model and reimagine the dynamic of our client relationships. What our profession will look and feel like after this pandemic is far behind us remains uncertain, but it’s readily apparent that there will be no going back to the way things were done prior to 2020. The auditors who can best adapt to this new environment will be the ones who win out in the long run.