Internal Audit

What is Virtual Audit and Embracing the Benefits of Virtual Audit

Given the current environment, the virtual audit appears after the time of the pandemic. It conducts almost all audits remotely necessary, but due to technology and client demands have led in this direction for years. Now clients and auditors are working together to discover a balance of on-site collaboration and virtual efficiency.

Historical audit problems

The audit process can be divided into four primary phases: planning, interim, fieldwork, and reporting. Planning and other administrative tasks may be done in person but typically via phone calls, web discussions, or emails with the client. For the interim phase, auditors may spend extra time on-site but traditionally planning on-site for a large portion of the final fieldwork. Reporting usually happens during the fieldwork phase, but final reports are often processed and completed once the audit team has left the client site.

The traditional audit process had already started to become virtual. Like most aspects of life, more and more information is being shared electronically through email or secure portals.

But it does not take away the importance of being on-site planning with a client or completing specific sections of an audit traditionally. However, an auditor and client interaction builds trust and confidence. But after, the pandemic outbreak forced auditors to adopt a different approach, which is advanced and hassle-free.

 In pre-pandemic times, when the auditors get specific information from clients, they usually request it from the client, and then the client could upload it immediately. When the lockdowns started, there were some situations where not everyone had access to the system, or, if they did, the organization did not have a virtual private network

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(VPN) set up. Hence, they couldn’t access certain documents from the office server or needed an invoice that wasn’t even saved to the network but was in a filing cabinet in a building where no one was allowed in.

On top of that, everyone has different life circumstances, including possibly having ill family members, caring for small children, or running virtual classes for school-aged children. Everyone’s internet capabilities are constantly being stretched to the limit. All those other things happening are distractions creating inefficiencies and affecting production.

Communication and adaptability

• To execute the virtual audit effectively and efficiently, the organization must be intentional in all process aspects. The company needed to be more thoughtful to interact intentionally with the other team members and clients.
• The company asked the team members to treat the auditors like they were on-site, encouraging them to be as available as possible to the auditors.
• The virtual audit can overlook the engagement between the auditors and client and have regular status meetings.
• The auditors, before the pandemic, ensured the team members were working for the company’s objective.
• Operating a remote environment reaffirmed the importance of regular communication with the audit team. The audit team needs to understand the companies prospectives with the less labour-intensive.

Embracing the virtual audit

Increased flexibility:

While the four phases of the audit process are the same as planning, interim, fieldwork, and reporting, they are executed differently.

For clients who have gone through the audit process, discuss the planning process with the auditor and provide year-to-date results. Occasionally, the organization is going through an acquisition, launching a product, closing a plan or something else requiring a more robust discussion.

Reduce Costs:

The year’s planning is different because nearly every organization has been affected by the pandemic in some way, good or bad. Therefore, focusing on collaborating with the client to work through potential challenges. Eliminating travel and related lodging and meals can reduce direct expenses and resource use.

Improved Efficiency

The interim audit is often considered the uncomplicated portion of the audit process. Still, auditors must adapt the process since they need help to do it physically.

Ensuring Success

• With The addition of Zoom calls, clients and auditors use screen sharing for the audit process.
• The interim audit is to identify other issues that may create risk, including potential impairment and management estimates.
•  Interim discussions will make the actual fieldwork process more efficient.
• Elements of fieldwork are different in pre-pandemic times.
• The timing and extent of testing may vary. Sometimes, an organisation may create a different risk factor from the auditor’s perspective.
• Lower materiality is a real possibility, which could mean changing fieldwork and creating additional testing or a different kind of testing.
• The auditor ensures the team deliberately thinks and addresses these before the final fieldwork.

The virtual audit process will go through the same exercise as traditional audits. Still, there will be different things to consider, including materiality, changes in potential audit adjustments or internal controls, and what may result in deficiencies. The auditors and their clients should regularly share their screens to improve the audit process.

Sharing and securing data

Apart from ensuring that they can share, review and verify the data. Virtual data rooms for secure document sharing can be helpful depending on the sensitivity of documentation. In some cases, companies must determine how much access to provide inspectors and auditors and whether to enable downloads, configure desktop synchronisation, and limit access times.

Conclusion

The pandemic accelerates the organization’s efforts to modernize its back-office operations and become paperless. At the same time, the communication improved dramatically between the audit team and the team members of a company to achieve the companies prospectives. In pre-pandemic times, the auditors would have been on-site to ask intermittent questions; the virtual audit environment forced the auditor to have prioritizations for their weekly meetings.

 In this virtual world, transparency is an effective tool. Therefore, it recommends clear communication to avoid possible misunderstandings.

Also Read: What is a Virtual Audit and How Are They Done?

1. https://en.wikipedia.org/wiki/Virtual_private_network