As we emerge from the pandemic period and move into the new normal, several challenges present themselves to auditors, and in particular audit seniors. There is much more to consider than remembering how to use an iron.
Given the way that the vast majority of audit work has been carried out since March 2020, audit team members stepping into senior roles may be lacking some of the skills that their more experienced colleagues had at the equivalent stage of their career. Many of these skills are developed through on-the-job experience so, as work has been performed remotely over the past couple of years, some of the core attributes of an effective senior may have been stymied.
It could therefore be worth considering how and where the audit work is conducted. Being on-site for weeks at a time, with fellow team members working in the same room together, seems to be less common now than pre-pandemic. However, the benefits of collaboration, teamwork and ‘learning by osmosis’ should not be underestimated and therefore some on-site time should be encouraged.
There are several personal skills and practical technical skills that should be part of a senior’s toolkit to ensure they can be an effective member of the team.
Personal skills
Audit firms have been very busy since 2020 and, based on discussions with partners across a range of firms I work with, this shows no sign of slowing down. In fact, the situation is being made more challenging due to difficulties in recruiting qualified staff, with incumbent teams being put under more pressure due to increased workloads. Audit seniors therefore need to understand how to prioritise competing demands on their time. Maintaining a simple to-do list can help here, but active diary management (through Outlook for instance) and blocking out appropriate time to complete tasks is a good discipline.
The audit senior should be allocated the more complex areas of the file and the key risk areas should be tackled first. One of my colleagues often recalls a situation he faced when he was an audit manager: the senior on a job had completed every other section of the file for a construction business before calling the manager at the end of the penultimate day of fieldwork to say that she did not know where to start with the work on construction contracts. This obviously was not in the audit plan, which highlights how important it is to create a detailed audit plan, where the key areas are front-loaded – and then stick to it. If assistance is required, do not be afraid to ask for it.
Audit seniors are likely to have more junior members of the team working for them. For seniors just stepping up into that role, it can be tricky to balance the competing demands of carrying out your own work and assisting the juniors. The following tips may be helpful.
- Before starting the audit, consider the skills of the juniors. It may be the case that their entire audit experience to date has been remote and some additional support may be necessary given their lack of on-site experience. This additional support should be factored into the job plan (and budget)
- Give the juniors a clear briefing of what you expect, set some objectives (which may be as simple as completing the whole section by lunchtime) and monitor their progress.
- In addition to prioritising your own workload, one of the key skills needed is delegation and, in particular, knowing what and when to delegate. As an audit senior, one of the golden rules is ‘do nothing you can delegate’. Nonetheless, when adding to the workload of another member of the team, do remember that another deadline may need to be adjusted.
A good audit senior needs to be an effective communicator. Being face to face with a client requires you to express yourself clearly and listen to their responses. As noted on the website of caba, the charity supporting ICAEW members and ACA students (at caba.org.uk/career/personal-development/improve-communication-at-work.html), an effective communicator is also a good listener: giving the person who is speaking your undivided attention, allowing them time to talk, thinking about what you are going to say beforehand, and asking the right type of questions.
Communication is also vital when you consider that junior members of the team will look to you for guidance. You need to be able to provide clear instructions on how to complete a task and be able to listen and respond appropriately to any problems or deficiencies identified by your team members.
Some of the other key core skills of an effective senior include:
- being assertive – which is not to be confused with being over-confident or aggressive;
- taking responsibility for your work and that of your team – which is likely to involve completing audit files on time and in budget, but may also require you to schedule a review by the Responsible Individual (RI) and coordinate the tax review;
- thinking on your feet and ‘expecting the unexpected’ – and taking time to carefully consider the new or unexpected before following up; and
- thinking about questions that the RI might ask and being fully prepared for any review meetings that take place internally or externally.
Practical technical skills
Anyone associated with audit will have noticed the term ‘professional scepticism’ being used more frequently. Feedback from audit regulators consistently identifies a lack of professional scepticism as being a driver for poor audit quality.
For example, the ‘Key issues for audit’ section of the Financial Reporting Council’s Developments in Audit 2021 report states: “The results of our Audit Quality Reviews and recent enforcement cases once again highlight deficiencies relating to lack of professional scepticism by auditors, including failures to sufficiently challenge management’s assumptions, as well as evidence of the poor application of professional judgement.”
ICAEW’s Audit Monitoring Report 2020/21 states that “the underlying issues behind many audits that require ‘improvement’ or ‘significant improvement’ are related to professional scepticism and challenge of management”.
Exercising professional scepticism includes being alert to:
- audit evidence that contradicts other audit evidence obtained;
- information that brings into question the reliability of documents and responses to enquiries to be used as audit evidence;
- conditions that may indicate possible fraud; and
- circumstances that suggest the need for audit procedures in addition to those required by the International Standards on Auditing (ISAs).
As Hercule Poirot says: “It is the brain, the little grey cells on which one must rely.”
Knowledge is key. Seniors need to be skilled in identifying audit risks as part of the audit planning process and designing appropriate tests to respond to those risks. Testing performed, results obtained and conclusions drawn should be sufficiently well documented to enable understanding by an experienced auditor with no previous connection to the audit – such as a cold file reviewer.
It should go without saying that seniors need to be technically up to date – and involved in any relevant training the firm is providing. Recent amendments to the auditing standards on accounting estimates and going concern have given rise to some fairly substantial increases in audit work and documentation. Over the coming months, changes around risk assessment and fraud and, to a lesser extent, the changes to the firm’s quality management system will pose further challenges for seniors.
These are not, of course, the only areas where auditors need to be aware of recent and coming changes. In addition, many of the challenges faced by auditors throughout the pandemic will continue for the foreseeable future. Exacerbated by the situation in Ukraine, difficulties may be encountered with the accounting for and auditing of, for example, impairment of intangibles, fraud risks and going concern.
Seek out support
There are several resources available to support your development, such as those from training organisations, ICAEW (see panel below) and the support charity caba. Audit seniors should show initiative and take some responsibility for actively discussing areas of development with managers and training partners, as well as seeking appropriate training courses to plug any gaps. In the current circumstances, audit may be challenging, but it presents a great opportunity for those seniors ready to ‘grasp the nettle’.
ICAEW resources
Amendments to standards for auditing and quality management have resulted in changes that all auditors, including audit seniors, need to know about. To aid understanding and provide implementation support, the faculty and other parts of ICAEW have developed and continue to develop specialist resources.
Accounting estimates: the ISA 540 hub.
Going concern: the ICAEW Insights ‘Going concern’ hub.
Quality management: a resource hub to assist with ‘Quality management in audit firms’.
Risk identification and assessment: preparing for ISA 315 is the subject of a March 2022 article, pointing readers to various ICAEW support resources.
Auditing fraud in the UK: a March 2022 article on finding fraud in audit offers practical tips and directs readers to various ICAEW resources to assist with this and the implementation of ISA (UK) 240.
Questions and answers: a recent Q&A from John Selwood also offers practical advice on some of the matters mentioned above.
Ukraine crisis: a central resource hub for auditors and other accountants.
Audit & Beyond
This article was first featured in the June 2022 edition of Audit & Beyond.
