Internal Audit

What is a Virtual Audit and How Are They Done?

Virtual Audit

Just before the pandemic and a need for work from culture came in India, everything took place on-site with the physical presence of people. When COVID-19[1] came in, and people were not able to travel to offices for work, the companies started working in online mode and encouraged work-from-home culture to maintain the safety of the employees and the responsibility to oblige with the lockdown guidelines. Also, when people started working online, there was a need to keep a check on their performance and the financial status of the organization. When a situation arose as to verification and audit of the company’s financial records becoming impossible to be executed physically by the auditors due to the pandemic or where the location of the audit was remote and not easily accessible, a need of virtual audit emerged. It included the use of the internet for audit. This made the working of the manufacturing and production units easy.

Virtual Audit and its process

Virtual audits also known as Remote or Electronic audit is a process of verification of a company’s financial data by competent professionals without face-to-face interaction with the help of the internet. All the information and financial records are exchanged using internet services.

There are well-defined guidelines for performing an audit which an auditor has to follow. Under the same, ISO 19011:2018 guidelines have been provided for virtual audits. There are certain steps involved in the process of virtual audit.

The process to conduct a virtual audit is as follows:-

  1. Preparation: The very first process is the collection of data and information which has to be audited. Thus, the auditor has to ask for every single detail essential for the audit and the responsibility of the auditee to provide the requested details to the auditor as and when asked. The company should appoint one of its employees for assistance to the auditor and ensure the employee’s availability when required. As the details are shared through the means of the internet, privacy acts as a huge concern. The auditors must comply with all the privacy policies and maintain confidentiality about certain documents which if comes to the general public’s access might negatively affect the company. There has to be a specific technology used which is safe and tested before the exchange of documents. The use of certain video conferencing applications which help the auditor to take a view of the company on-site must also be decided. The auditee must ensure that there is a proper internet connection and a team to manage the audit while the video conference takes place. The appointed team is responsible for sending invitations to all the professionals who are required to join the virtual meeting and provide an on-site tour through video conferencing. Whenever it is not possible to cover the total unit through video conference, the team must show all the essential areas of the office/production unit.
  2. Performance: It is the duty of the auditor to audit the company virtually with the same responsibility as they perform the on-site audit. The auditee is given substantial time to upload and exchange all the important information and not conceal any information relevant for the auditor to know. The auditor shall review all the documents, and conduct video conferences to inspect the unit. The auditor, from time to time has to conduct virtual meetings with the managers of the company with the agreed medium. The company can show the working within the organization through the preparation of charts, PowerPoint presentations, or short videos depicting the working of certain machinery, plants, etc. If the auditee fails to send any document to the auditor for verification, he has to inform about the same to the auditor about and present such information through another available means of communication. The audit shall be conducted within the reasonable and operational working hours of the company.
  3. Closing meeting: The auditor has to contact the designated team for an audit of the company for the conduction of a closing meeting. An auditor has to ensure that the invitation for the closing meeting has been sent to the appropriate invitees in a reasonable time. The closing meeting is generally conducted through the agreed means of video conferencing. The auditor then informs the people about the audit report and conducts a virtual tour of the office in real-time, if required to verify the working of the unit.
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Advantages of Virtual Audit

  • A virtual audit is time-saving and saves the costs of the company who is being audited. The auditor need not wait for the documents to reach him physically or travel to places for audit which is a bit far or is situated in isolated areas.
  • If the audit has to be conducted internationally, then it saves the time and paperwork of the auditor for applying for a visa as everything is executed virtually.
  • When the audit is performed in offline mode, the auditee has to ensure clean conference halls or rooms and look after basic arrangements for them, but it is not with the case in virtual audit.
  • The auditor has ample time to perform his audit function as they save the time which is generally wasted while travelling to the auditee’s location. This increases the efficiency and effectiveness of the auditor.

Challenges faced in virtual audits

  • Every accounting and audit authority does not approve of virtual audit reports as authentic and reliable reports. They only approve of the basic and offline audits performed by the auditors. There is no time limit defined for the completion of such virtual audits and not every professional is well-versed with the technical know-how for proper conduction of such audits.
  • The authority needs to establish certain defined centres for training auditors for the smooth and proper conduction of virtual audits. Thus, a need to reform the present structure arises.
  • Sometimes, a poor internet connection might create a problem and remote areas might not have proper internet connections.
  • While performing a virtual audit, the problem of availability of desired personnel is also an issue.
  • The auditee company has to organize sessions to make its employees aware of the working and conduct of virtual audits.
  • The virtual audit system has no direct access to the company data or the working office which might lead to the company concealing any important document or issue being faced by the employees. This reduces the transparency of the company’s status.
  • It is the duty of the company to make sure that every personnel in the designated team for the conduction of a virtual audit has sufficient knowledge about the technology being used for such an audit.
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The auditor must ensure the following issues before performing virtual audits:

  • Giving a defined time limit to the auditee for making the information available to the auditor.
  • Must ensure that there is a system which safeguards the confidential documents of the company.
  • Always maintain a backup of the data to save such data loss in cases of virtual crimes.


Virtual audits are time and cost-efficient. Thus, they seem to be the future of auditing over the traditional auditing techniques available. There are certain reliability issues which need to be looked upon. The competent legislative authority must look into this aspect and form guidelines for the conduction of proper virtual audits. The virtual audits appear to appeal the companies and auditors due to several benefits. The cost of audit reduces which saves the company’s expenses and benefits the auditor by an increase in the working time from their comfort level.

Read our Article: What Are The Basic Principles Of Auditing?

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