Audit Tips for an Environment Changed by a Pandemic
The business environment in the midst of the COVID-19 pandemic has resulted in significant changes in the risks and outcomes that auditors consider and test during their assignments.
In many cases, income and expenses have changed considerably; supply chain and labor challenges presented new risks; and business strategies have changed rapidly as audit clients struggle to survive and thrive in the new environment.
“Through the vagueness of nearly two years of working remotely, auditors have had to be nimble and flexible to [manage] this constant which was undoubtedly imposed on us in 2020 and continued throughout 2021 ”, declared Wednesday George Botic, director of registration and inspections of the PCAOB, during the AICPA & CIMA conference on developments current SEC and PCAOB. “Unpredictable change and how we adapt and respond to it.”
Botic said that inspections of audit firms by the PCAOB in 2022 will focus on many areas that are determined by the current economic environment. These include:
- Initial public offerings;
- Merger and acquisition activities;
- Widespread disruption of supply chains;
- Negative effects of COVID-19 on certain industries; and
- Continued focus on Special Purpose Acquisition Company (SPAC) audits and de-SPAC transactions.
Broker inspections, on the other hand, will focus on audits of brokers responsible for holding client funds, maintaining custody of client securities and providing client account statements.
Meanwhile, the PCAOB found that the confirmations were causing problems for audit firms. Botic said some companies do not perform sufficient procedures when a service provider is used in the confirmation process, adding that using a service provider does not relieve an auditor from the obligation to keep the control over the confirmation process.
“Auditing firms should determine whether their policies and procedures relating to using a service provider to send and receive confirmations provide reasonable assurance that their staff are meeting professional standards,” said Botic.
The pandemic environment has also created personnel challenges for audit firms that the PCAOB will monitor closely. Botic said that an audit firm’s quality control policies should be designed to take into account the importance of staff knowledge and experience, and that firms should be aware of the risk that staff turnover may arise. created for audit quality.
“Rapid staff turnover can result in increased workloads and fewer experienced professionals with a detailed understanding of an audit firm’s methodology, policies and procedures,” he said.
Botic said his main lessons from this difficult year are:
- It is essential to exercise professional diligence and professional skepticism in all aspects of the audit. “While both must be applied at all times, the continued disruption of the pandemic and the risks associated with the current economic climate only increase in importance,” he said.
- Thorough and continuous risk assessment procedures must be implemented, and the impact of changes due to the current economic climate must be understood. “Auditors should reconsider their initial risk assessment and modify planned audit procedures as circumstances change,” he said.
- Auditors should focus on fraud procedures and build unpredictability into their assignments. “I mentioned it last year,” he said, “and given the lingering uncertainties, I would like to reiterate its importance to the audit and to investor expectations.”
–Ken tysiac ([email protected]) is the JofAeditorial director of.