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Quarterly issue 4

Remote auditing: a challenge for auditors during the COVID-19 crisis

Author: ICAEW Insights

Published: 01 Dec 2020

Network computers

Forced into remote working, with little peer support, and unable to visit client sites auditors are facing a new set of challenges. Alison Coleman reports

The UK audit sector has been under considerable scrutiny in recent years. More will be revealed about the direction of travel for the Audit, Reporting and Governance Authority (ARGA) and the audit sector in general when the Department for Business, Energy & Industrial Strategy publishes its plans for audit reform, which at the time of writing have not been released but are due before Christmas. In the meantime auditors must continue with their work amid the ongoing pandemic. But what is it like to be working in the profession at the moment and what challenges does it face in the future?

Neither the prospect of tougher regulation nor criticism of the profession appears to have deterred talent from the sector. Many firms say that recruitment, particularly among trainees, is buoyant, while retention may have been enhanced by the pandemic as newly qualified chartered accountants, who may otherwise have chosen to move from practice to industry, are staying put amid the uncertainty.

A much bigger challenge of remote working is training and development, as Mandy Janes, audit partner at HW Fisher, explains. She says: “New trainees would normally expect to go straight to client sites on audits, liaising with clients from the start, and learning from their seniors. With lockdown, they’ve been unable to have that face-to-face contact with clients and, as a result, aren’t learning how to talk to clients about their businesses. That relationship is so important. Lockdown also presents challenges when it comes to exams. With people stuck at home without the support of their peers, making sure they learn how to prepare for and pass exams is crucial.”

The impact of COVID-19

Auditors are under time pressure with clients focused on managing through the pandemic and ensuing developments. “As an auditor, we are likely to be entering quite a tricky period in terms of assessing the going concern basis and all of the associated disclosure requirements in our clients’ accounts as more and more businesses come under increasing financial pressure,” says Nigel Ling, senior manager at McBrides.

Lockdown forced firms to move their operations and interactions online and face the challenges of conducting work remotely, while maintaining a focus on audit quality. However, the move also sparked innovation. Deloitte now conducts remote inventory counts that it says are likely to continue into the future.

Paul Stephenson, UK Managing Partner for Audit & Assurance at Deloitte, says: “Our work is likely to be through a mix of in-person and virtual interactions, creating a real opportunity for the profession to become more inclusive, with the additional flexibility this promises.”

The scrutiny has highlighted the importance of what auditors do and the role they play in the capital markets, he says. “We recognise that the auditing profession needs to develop to restore public confidence. It will do this by continuing to improve audit quality and by working with the other market participants to ensure that corporate reporting better serves changing stakeholder needs and the society in which we operate. Audit, like few other professions, represents an opportunity to see deeply into businesses. Our work enhances trust in the companies we audit, helping the capital markets function with greater confidence, and I believe we should be proud of the role we play.”

However, Ben Sheldon, senior manager in Audit & Assurance at Azets, suggests that the drive to improve audit quality could undermine one of the crucial and rewarding roles of the auditor.

He says. “As an auditor, I perform a statutory audit, but I also make a difference to businesses: getting alongside them, understanding their challenges and opportunities, and being that critical friend. Sometimes we become so worried about the minutiae of the auditing standards, we risk losing sight of pragmatism, and the real world audit becomes theoretical rather than practical. When that happens, we lose sight of the bigger picture in businesses we are auditing; we don’t get under the skin of the business sufficiently, which exposes us to audit risk, but it also means we lose one of the most rewarding aspects of the role.”

Challenges ahead

Others have expressed concerns about the prospect of audit services being separated. Maureen Penfold, managing partner at Moore Kingston Smith, says: “We don’t want to see the profession being split between the PIE (public interest equity) auditor and the non-PIE auditor. We audit in the mid-market, working with SMEs, and we need people with all-round skills.

“A growing, independent SME may not be a PIE but it relies on its auditors to bring that professional scepticism and do the audit properly. However, they also want a supportive relationship with an auditor who sees the bigger picture and can help them as they develop their business. That’s difficult if you have to be so careful in terms of, for example, an auditor not being able to have lunch with that client, where you can get a better understanding of what’s happening in that business than just from the financial documents. There is a need for balance.”

However, Alistair Hunt, National Audit Partner at Saffery Champness, believes that the audit profession needs to price audit work properly and that the separating of audit firms for the largest practices may well be a step in the right direction. “The criticism of the audit sector impacts all firms whatever their size,” he says. “There is a perception that audit has been used as a loss leader for other advisory work. The separation of audit practices for the Big Four will trickle down quality and assurance improvements across all audit firms, thus ensuring that confidence in the audit sector returns.”