Public Company Auditors: Adapting to the Pandemic and Preparing for the Future
The coronavirus pandemic presented unprecedented challenges for industries worldwide, including the auditing profession. However, public company auditors responded quickly and effectively, helping to preserve public confidence in capital markets. As noted by Center for Audit Quality (CAQ) Executive Director Julie Bell Lindsay, auditors leveraged technology and their creative problem-solving skills, maintaining high-quality engagements during a time of uncertainty.
In an interview, Lindsay emphasized that auditors have not only adapted by using advanced tools but also exercised their professional skepticism, ensuring that they could handle complex issues while supporting audit committees through evolving challenges. Auditors' efforts during the pandemic, she said, have been pivotal in keeping U.S. capital markets functioning smoothly.
The CAQ, affiliated with the American Institute of CPAs (AICPA), launched its “Audit in Action” campaign to highlight auditors' resilience during the pandemic. The initiative showcases stories of auditors’ work in areas such as ESG assurance, fraud deterrence, and the multidisciplinary model of public company audit firms.
Maintaining audit quality remained the primary objective for auditors throughout the pandemic. Three main components contributed to this continued success:
Technology: Auditors, such as those from Deloitte, relied heavily on cloud-based audit platforms and videoconferencing technologies to facilitate seamless transitions to remote auditing environments. These tools allowed auditors to continue working efficiently without compromising the integrity of their work.
Creativity: Auditors applied creativity to overcome challenges in a remote environment. For instance, the use of GPS technology during inventory verification via video ensured that auditors could accurately observe inventory locations, even remotely. The pandemic changed the conditions, but auditors maintained the same high standards, often adapting and implementing new policies.
Professional Skepticism: Auditors maintained their core competency of skepticism, crucial to the profession. During remote audits, skepticism was applied in innovative ways, such as verifying inventory via GPS, which shows the adaptability of auditors even in these challenging times.
As businesses began reopening, auditors transitioned to a hybrid audit approach, combining remote work with in-person visits when safe. Lindsay emphasized that whether audits were conducted remotely or in person, the same high standard of audit quality was maintained.
Looking beyond the pandemic, Lindsay expects remote auditing to remain a fixture in the profession. While in-person audits will regain momentum as conditions improve, the pandemic has proven that remote auditing can maintain audit quality, allowing auditors to work effectively in both settings.
Hybrid Work Models: The future of auditing will likely involve both remote and in-person work. The pandemic demonstrated auditors' ability to make well-reasoned decisions about when to use remote tools without compromising audit quality, and this flexibility is expected to continue.
Technology-Enabled Audit Improvements: Technology will continue to evolve, shifting the focus of audits from basic tasks to higher-risk, more subjective areas. For instance, rather than manually sampling contracts, auditors could use technology to review an entire inventory of lease contracts, improving efficiency.
New Opportunities for Auditors: The adaptability shown during the pandemic has opened up new opportunities for auditors to expand their roles. For example, auditors can apply their expertise not only to traditional financial information but also to emerging fields such as ESG (Environmental, Social, and Governance) data and cybersecurity information assurance. This evolution broadens the scope of auditors' influence and relevance.
In conclusion, the auditing profession has proven its ability to adapt to changing circumstances, providing critical leadership and maintaining high standards during the pandemic. The future of auditing will likely combine innovative technologies with flexible approaches, expanding auditors' roles in the process.
Public company auditors have responded quickly and effectively to the coronavirus pandemic to help preserve the public’s critically important confidence in capital markets.
That’s the conclusion drawn by Center for Audit Quality (CAQ) Executive Director Julie Bell Lindsay, who said in a telephone interview that auditors have used technology and their creativity while exercising their professional skepticism to maintain high quality in engagements. Auditors also have shared knowledge and experiences with audit committees facing new and complex accounting issues, all while investing time and resources in communities hit hard by the pandemic, she said.
“In these uncertain times, we believe these efforts and quick actions have really helped to maintain the continued orderly operation of the U.S. capital markets,” Lindsay said.
The CAQ, which is affiliated with the AICPA, launched Monday a campaign called “Audit in Action” to put a face on the work auditors do through videos, blog posts, and other presentations of dynamic stories. The campaign will highlight auditors’ resilience during the pandemic; show how auditors provide value and leadership in areas such as assurance of ESG information and fraud deterrence; and demonstrate the multidisciplinary model of public company audit firms.
Maintaining audit quality has been auditors’ most important objective during the pandemic, Lindsay said, highlighting three components that have contributed to continued quality:
Auditors also have provided value to audit committees and public companies by sharing their insight on technical accounting issues such as going concern and goodwill impairment that have been encountered in unprecedented ways during the pandemic, Lindsay said.
As companies have begun phased reopenings after the initial lockdown, practitioners also have made a transition to a hybrid approach to audits, continuing remote work but also engaging in some face-to-face auditing when it’s deemed to be safe.
“When it’s not safe to do it in person, they’re going to do it remotely,” Lindsay said. “When it can be done in person, they’re going to do it in person. But either way, whether it’s in person or remotely, across the board the same high standard for audit quality is maintained.”
Lindsay expects future auditing developments to include:
Both remote and in-person work. The profession has learned a lot about remote auditing during the pandemic, she said. She predicted that in-person auditing will continue to gain momentum as the pandemic abates but said in-person work may never return to pre-pandemic levels. “During the pandemic, the public company auditing profession has proven they can make really well-reasoned judgments about when and how they can conduct audits remotely while maintaining audit quality,” she said.
Technology-enabled audit improvements. Technology will enable auditors to concentrate less on basic tasks and more on subjective, high-risk areas of the audit. For example, manual sampling of lease contracts may be replaced with technology-aided inspection of the entire lease contract inventory. “I think it’s going to be a combination of leveraging what the firms are already doing with the technology from before the pandemic, seeing how it worked during the pandemic, and continuing to use it in practice,” Lindsay said.
New opportunities for practitioners. The way auditors have proved they can adapt to pandemic-related challenges will open up new opportunities for them to use their skill sets, Lindsay said. “Investors and other financial reporting stakeholders have really seen that the auditor skill set can be transferable to other areas, and that can be things like assurance of nontraditional financial information like ESG and cybersecurity information,” she said. “It’s not just historical financial information. They can take their skill set and apply it to new environments of financial auditing but also other areas of nontraditional financial information.”
For more information on the CAQ’s Audit in Action campaign, visit AuditinAction.org.
— Ken Tysiac ([email protected]) is the JofA’s editorial director.
— Credited from https://www.journalofaccountancy.com/news/2020/aug/auditors-show-resilience-during-coronavirus-pandemic.html
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