Completing an audit remotely during these testing times of coronavirus

01 May 2020 In-depth

With the coronavirus pandemic forcing those that can to work from home, charities have concerns about completing their audit. But it can be done remotely, says Richard Weaver.

In these unprecedented times, there are many challenges that organisations face. With most charities having either December or March year ends, the onset of another audit cycle adds to those pressures.

Audit practices, like many other professional firms, will have invested over the years in having a solid, secure IT framework, and should have adapted their audit processes to work more remotely. The IT platforms allow staff to work from separate locations through a portal system, which accesses the audit files as if the staff were all in the office. Secure platforms for the sharing of documentation and evidence for the audit file, and the use of software such as Microsoft Teams and Zoom, are proving invaluable for conducting virtual meetings and keeping in touch throughout the process.

There are, however, a number of critical requirements in order to be efficient in this new working environment:

  1. Having a set of accounts prepared one week in advance of any fieldwork timetable. This allows auditors to plan and focus their work in the right risk areas and helps to identify any reporting changes as quickly as possible.
  2. In addition to the accounts, having lead schedules with support for all balances in the preparation of the accounts. The charity’s “audit file” can be submitted through the secure portal or emailed to your auditor.
  3. There are two tricky areas of an audit which require careful consideration. Stock takes and physical observation of controls and physical verification of assets. Discuss these in advance with your auditor as there are ways to ensure that this work can still be carried out remotely, or in the case of stock takes, it may be that having closed down, the stock will not move until you are open again. The stock take can then be deferred.
  4. The ability to download the nominal ledger transaction history. From these reports, auditors are then able to select the samples of entries that they wish to test so that your team can extract this information and securely submit the information through the portal. This does require you to be able to access the data remotely or have access to the physical copies to be able to email them to the audit teams.
  5. Prepare documentary notes on any key judgments and estimates used in the preparation of the accounts. These documents are particularly useful audit evidence but are also a helpful internal permanent record. Key areas might be income recognition, deferred and accrued income, provisions, asset valuations, and pension liabilities, as well as the assumptions which underlie them. This is not an exhaustive list, so discuss these areas with your audit team as part of the planning process.
  6. Going concern – this is now the most fundamental judgment that is being made when trustees approve the accounts. New audit guidance was issued before Christmas, and this has been updated more recently as a result of the Covid-19 pandemic, advising on the further work that both charities and auditors need to do in order to sufficiently evidence the going concern principle. These are uncertain times, and so one cash flow may not be enough. You will need to consider various scenarios and document the assumptions you are making, and the board will need to review these carefully. Auditors we will also need to critically assess those assumptions.

Additional disclosures will be necessary even for those organisations that have strong balance sheets, in order to evidence the risks that you now face and the impact these may have on the business. Also, remember that you need to have these assessments for every entity that you are signing off in the group.

These systems and processes are designed to keep the cycle running with as little disruption as possible, but inevitably there will be delays to the process compared to previous years.

It is likely that the core audit work can continue as normal, and then you reconvene later in the year to review going concern. You will sign off later than you have done in previous years, but still meet your filing deadlines.  

Richard Weaver is partner and head of charities and not-for-profit at haysmacintyre

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