How to make your remote audits a success
August 6, 2020
By Liza Robbins.
It was the longest video call of his life…
The auditor had just spent six hours on Facetime with a client, reviewing the stock in their warehouse.
“The client kept on putting his phone in his pocket, which made the conversation a challenge,” says Lisa Leighton, co-managing partner at BHP Chartered accountants, one of Kreston’s firms in the UK. “And each time he went up or down a flight of stairs, our auditor got motion sickness!”
Welcome to the brave new world of audits which are conducted remotely, end-to-end…
Your firm has probably conducted quite a few of these itself since the Coronavirus crisis broke.
But while they are clearly becoming standard, they also involve significant changes in the way we work.
So how are Kreston firms adjusting? What challenges are involved – and what opportunities? And what can we all learn from each other’s experiences?
I set out to find out by speaking to two firms which, between them, have conducted dozens of remote audits in recent months.
Lisa says that they adjusted relatively smoothly because – like many of the UK firms – they had already been using Inflo, a platform that automates some aspects of the auditing process, for two years.
“We started using it because the audit quality improves, which has nothing to do with remote working,” she says.
“But it requires clients to upload all their audit deliverables onto one portal. So when Coronavirus began and we had to shift towards remote auditing, most of our clients were already used to this system – which made things considerably easier!”
Overall, the transition was smooth.
One obstacle was seeing physical stock – hence the 6-hour Facetime call. Now that most clients of hers are accepting auditors back on site, this is one element that they have gone back to doing in person.
This was also a significant challenge for the team at the Kreston IL Group, which conducts internal audits for American companies listed on the Israeli stock exchange.
“We recently had to audit a construction site in Texas,” recounts Doron Rozenblum, managing partner of Ezra Yehuda-Rozenblum.
“We did most of it on Zoom, but we really needed someone physically on-site to see what was going on there. We had to reach out to someone on our team who had moved to Houston, and ask her to assist.”
In future, says Roy Weisberg, managing partner for Kreston Consulting IL, this will make partnerships with other Kreston firms overseas even more critical, because in many locations they can step in.
Inevitably, firms are more reliant on their clients to supply the necessary data for remote audits.
Lisa says that there has been a bit of pushback from long-time clients who were used to the auditors finding information themselves.
The client which was most cooperative was brand-new and had never had an audit before – so they had no expectations around who traditionally does what.
Even with new clients, Lisa says it was not difficult to build trust online. The key was regular contact – and over time, video conferencing actually makes that easier.
But, caution the Israelis, that is balanced out by the need to exercise more caution, because fraud is inevitably easier when auditing remotely.
“There is no substitute to flying in and telling the CFO that you want to see a document immediately,” says Roy. “You have to be a lot more wary when you’re auditing remotely, and institute other controls to verify the information you’re given.”
So, for example, they have added a call with the external auditors. And on occasion, they’ve insisted that clients log onto their system and show them certain documents ‘live’, sharing their screen, instead of simply forwarding a document which can be amended later.
But the biggest challenge of all has been internal – getting the audits done in a timely manner.
“We used to fly in for a week’s work, everyone was available to us, and by the time we flew out we had everything we needed,” says Doron. “But when you audit remotely, clients feel they can postpone everything… Maybe we’ll speak to you tomorrow, we forgot to send you this or that… It takes 30% longer.”
They have had to allow more time for each audit and “be persistent… It’s the only way.”
“Time management and project management skills have become a lot more important,” agrees Lisa.
Since lockdown has eased, they have created a socially distanced “audit room” in their office where the auditors can collaborate more easily than they can from home, even if they are not visiting the clients’ premises.
Not only does this make them more efficient, but it helps inexperienced trainees get the guidance they need.
Despite the obstacles, though, both firms agree that remote audits are a positive development, which allows them more flexibility and to cut down on travel, with only minor trade-offs.
Even if face-to-face audits become possible again, they do not anticipate a return to that model.
Lisa particularly appreciated being able to deliver her audit completion meeting remotely, because more board members could attend that meeting.
“I got more engagement with the client – it was much better!” she says.
Overall, she concludes: “I really can’t understand why we didn’t do this earlier!”