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Remote auditing frequently asked questions

This Know-How Guide from ICAEW’s Audit and Assurance Faculty considers a selection of frequently asked questions about auditing remotely in light of the coronavirus pandemic. It may be updated or extended from time to time in response to events and member feedback.

1. Do I need to update my engagement letter in light of COVID-19?

Potentially. The pandemic may result in a number of delays to work being completed, either through mandatory closures or issues such as staff absences due to illness. Risks and restrictions may mean auditors need additional evidence to complete the audit. All of this has to be factored into the timetable, budget and fees.

The scope of the engagement may also widen, or a separate engagement may be required, as management may ask auditors for views on a range of business issues, such as access to government grants, loans and other COVID-19 schemes. 

Be aware of independence issues and the need to put in place safeguards where necessary. The FRC's Revised Ethical Standard 2019 has extended prohibitions on certain non-audit services. However, its COVID guidance refers directly to the permissibility of helping audited entities prepare applications for government help. 

2. I have a new audit engagement, and the previous auditor has closed their physical premises. Can I review the previous auditor’s files remotely? 

Where changes are made to auditor appointments, alternatives to the usual physical review of electronic or paper files at the previous auditor's offices may be necessary.

You may need to revise your access letters for successor auditors to set out your firm's expectations about how remote reviews are to be performed, and additional security measures may be imposed on incoming auditors reviewing files at home or in their own offices.

3. Management want us to come to their premises to undertake  the audit. How should we respond?

Some audited entities may seek face-to-face engagement, regardless of restrictions. Differences of opinion regarding the exact nature of the restrictions and how they apply may arise, as may disagreements about the need for and extent to which audit staff can or should be asked to travel to the entity's premises. These issues need not present insurmountable difficulties provided auditors develop clear internal policies for the firm regarding staff welfare and remote working.

Auditors should review government health guidelines and any restrictions in the applicable jurisdiction. If such restrictions are in place, auditors may need to consider cancelling or delaying work that cannot be done remotely to safeguard the wellbeing of audit firm and audited entity staff.

4. Does COVID-19 mean that I need to amend my quality control processes?

Potentially. Many of the quality control requirements of ISQC 1 and ISA 220 will be met through virtual discussions, meetings and file access. Auditors need to think about how to maintain and document compliance with all quality control requirements, none of which have changed, regardless of whether audits, or inspections of audit firms, are conducted on-site or remotely.  

For example, firms are taking different approaches to consultation on audit reports, depending on the nature of the entities they audit. Some, particularly those with a large portfolio of smaller listed entities, may mandate consultation if no modification to the audit report is required. Clear documentation of any revised approach, clear communication within the firm and evidence of compliance are all important.  

Also, be aware that staffing issues, including staff welfare, are quality control issues. This applies to both auditors, as well as the management and staff of audited entities. 

5. What issues should I be aware of when obtaining evidence remotely?

Auditing standards assume in many cases that auditors can be physically present at the entity's premises. 

While the four basic techniques for gathering audit evidence - observation, inspection, inquiry, and analytical procedures - do not require auditors to be on-site, auditors will need to consider how to compensate for a lack of physical proximity in some areas. A different mix of techniques is likely to be necessary to provide sufficient, appropriate audit evidence, and the quality and quantity of audit evidence required will need to be reconsidered. 

Our more in-depth guide to remote auditing considers this further, including third party confirmations and use of expert valuations. Two ICAEW COVID-19 guides consider specific issues on inventory testing and group audits in more detail. 

6. Do I need to revise my risk assessment due to COVID-19?

It’s likely that you will need to revise your audit approach and risk assessments due to COVID-19 to take into account of:

  • the extent to which the audited entity appears to be affected by COVID-19 and its financial and operational resilience;
  • the integrity of management, and the quality of the control environment and controls over financial reporting;
  • your firm’s existing baseline audit approach, the extent of focus on substantive procedures or controls testing, and the availability of sufficient, appropriate audit evidence; and
  • reporting dates and deadlines.

Changes to the risk assessment seem likely at many levels for many businesses, particularly in relation to asset valuations and going concern. 

7. How might COVID-19 have impacted internal controls?

There are likely to have been changes in the control environment and procedures due to remote working. Auditors need to establish how business continuity plans were implemented, what evidence exists relating to implementation, and then determine how that affects the audit evidence likely to be available.

Be aware of the tone at the top, and how this may impact how controls and processes are adhered to. Also, where entities have implemented new systems to facilitate remote working, auditors will need to evaluate the effect of curtailed pilot testing or training. 

8. Where can I go for further guidance?

The Audit and Assurance Faculty has prepared a more comprehensive guide on remote auditing in practice which is available to faculty members and available for purchase. There are also resources available in the COVID-19 and audit hub to support auditors during the pandemic. If in doubt, ICAEW members should contact the Technical Advisory service on +44 (0)1908 248 250 or e-mail technicalenquiries@icaew.com.