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September 21, 2021
September 21, 2021
September 17, 2021
Many audits went ‘virtual’ in 2020, either partially or wholly, accelerating a process that’s been underway for a decade or more. What are the rules, and what is best practice, as they currently stand? And where might they be going in years to come?
Traditionally, audits have relied on the evidence of the auditor’s own senses and have valued physical evidence wherever possible. That has meant auditors on site with clients, reviewing paper records, and getting close enough to touch high-value assets.
With business increasingly being done online, and intangible assets such as software or development costs becoming more common, that has begun to feel, to some, a little anachronistic.
With the rise of secure document transfer protocols, and the drive for end-to-end digital record-keeping through programmes such as Making Tax Digital, digitalisation was already underway.
In 2019, even before the COVID-19 pandemic, there was much excitement around the idea of using drones to conduct stock audits in hard-to-reach locations, such as coal fields.
With climate change on the agenda, too, the idea of sending audit teams out on planes, trains and automobiles by default came under scrutiny. Could this be a way for the audit industry to play its part in reducing carbon emissions?
Then came lockdown, affecting different territories to different degrees at different times. The audit industry was forced to embrace new ways of working overnight – and find ways to ensure the quality and robustness of virtual audits.
As happened across many sectors, auditors and their clients pedalled a little harder to make it work, but there were clear downsides.
In practical terms, the challenges are around obtaining sufficient evidence, and appropriate evidence, as the basis of an audit opinion. Auditors have developed new ways of obtaining audit evidence such as attending stock observations virtually through the use of video facilities. Assessing the reliability of audit evidence is important as limitations in the availability of audit evidence may need to be stated in the audit report.
Less tangibly, and anecdotally, auditors value opportunities for informal, ad-hoc conversation at client premises. Entirely remote audits deny them opportunities to see those client businesses or organisations in operation and to ask questions as and when they arise. This is not only important in reducing audit risk but also because it allows auditors to deliver a better service.
Finally, there are concerns around the reliability of evidence presented digitally. It may sound like science fiction but we already see deepfake technology being used to spoof voices and likenesses in audio and video, in close to real time. Less sophisticated deception might involve relatively simple digital manipulation of documents by, for example, copying signatures from one to another.
In 2020, the International Auditing and Assurance Standards Board (IAASB), which oversees audit standards worldwide, issued a series of policy statements in response to COVID-19.
Those touched on remote audit only in passing, and only then to underline the importance of adhering to existing principles. And, indeed, on the need to double down on professional scrutiny and scepticism.
Audit standards tend to evolve slowly, over the course of years – and rightly so. Nonetheless, that means we are not likely to see any sweeping policy judgements further encouraging remote audit anytime soon.
As staff return to offices and workplaces, what we’re likely to see is a return to in-person auditing, with some remote audit practices retained as part of the mix.
Where auditors feel confident in providing an opinion based on digital-only evidence, or evidence received by correspondence, they may continue to use it.
That will reduce travel time, reduce the potential burden on clients, while retaining the physical presence of auditors for instances where it can really add the most value.
Contact your local Kreston firm for more information or to talk about how modern audit procedures might work for you. Or contact us at Kreston Global via kreston.com
September 14, 2021
LONDON – Kreston Global has today appointed Theo C Theodoulou as Chair of the Kreston Global Audit Group.
Theo is a director of Kreston Global member firm Kreston Ioannou & Theodoulou Ltd (Kreston ITH), based in Nicosia, Cyprus. He is also a non-executive board member at the Cyprus Securities and Exchange Commission (CySEC) and the president of the Audit Committee of CySEC.
Theo’s experience includes redesigning the audit methodology of Kreston ITH, which ensures compliance with the Institute of Public Certified Accountants of Cyprus cold reviews, and which has been resold to multiple local firms in Cyprus. Aside from his experience developing technical strategy, Theo is also an experienced manager of audit portfolios for large international groups and is finance director for one of the biggest football clubs in Cyprus, Anorthosis Famagusta Football (Public) Limited.
Theo takes over the Audit role from Andrew Collier, who has overseen Kreston Global’s Audit offering since 2011 and is stepping aside to focus on his role as Director of Quality and Professional Standards. As Chair, Theo will be primarily responsible for coordinating the Kreston Global Audit Group and ensuring the team remains up to date on international audit developments
The announcement follows Kreston Global’s rebrand, announced in July 2021, and comes in the same year that Kreston celebrates its 50th anniversary.
Theo C Theodoulou, Audit Chair of Kreston Global said:
“I am honoured to have been selected as Chair of the Kreston Global Audit Group at such an exciting time for the Kreston Global network. The audit sector continues to face an escalating pace of change, and for us change starts with redefining our goals and approach, including the way in which we interact with member firms and implement strategy across the network. We will inevitably face various challenges, as well as opportunities in the coming months, and in response I hope to build on to date by promoting a fully collaborative exchange of ideas, materials, and support between individual member firms.”
Liza Robbins, Chief Executive of Kreston Global, commented:
“We are delighted to welcome Theo as new Audit Chair of Kreston Global. Theo has considerable exposure to the audit profession; as we continue to evolve, and as member firms begin to adjust to the new normal, his commitment to future proofing and streamlining audit strategy and knowledge sharing will benefit not only the component parts, but also the cohesion of the whole Kreston network.”
A global minimum tax rate of 15% was one of the central topics of the June 2021 G7 meeting in Cornwall. It aims to reduce tax competition and profit shifting in all economic sectors. The ultimate goal is to ensure that the global profits of multinational enterprises would be taxed at an effective tax rate. This move would be disadvantageous for some developing countries, while for some others it would be beneficial.
Taxation magazine’s latest piece discusses the potential impact of the proposed G7 minimum tax deal on developing countries.
Below are the key points from the article:
Read the full article here.
August 18, 2021
August 16, 2021
Lion Cashmere Midco owns textile giant the DMC Group which includes Sirdar Group Ltd (Tilsatec Ltd and Sirdar Holdings Ltd), Wool and the Gang and Mouliné & Co SAS (DMC SAS) as well as the Rowan brand.
The DMC Group’s main business is the manufacture and distribution of yarn and embroidery products while it also makes high quality technical yarns for cut and thermal resistant gloves. It employs more than 440 people across seven sites and its principal global sales are in Europe, the US and Asia.
Following a restructure and change in ownership in 2019, the group was faced with a reporting issue, particularly with providing a full-year comparative because the takeover was in early February 19. There was also Purchase Price Agreement (PPA) work to be carried out as well as the tax deductibility of the restructuring cost.
Kreston Global UK member firm, Kreston Reeves, was asked to do the work with Corporate Manager, Sean Rodwell, leading the team. They put together Pro-Forma 12 months’ results by consolidation 41 days result (pre-sale) and the rest of the year results so meaningful full-year results could be achieved. The PPA work was also completed and made compliant. Corporate Tax Manager, Mark Heath, provided professional advice on tax deductibility to ensure that the group could benefit from the maximum deductions available.
Kay Ahmed, (Group FC), said: “I have always found Sean and Mark to be very professional, honest, and helpful. Their advice is based on facts and is compliant with current regulations. I will not hesitate to recommend Kreston Reeves to anyone for their accounting, finance and reporting needs.”
Sean Rodwell commented: “We were very pleased to be able to help the company complete all the necessary requirements during such a major change for them. We look forward to continuing our long-term relationship with the management team and to the company’s future growth.”
