AUDITING ‘FROM HOME’ - AN AUDACITY

about 17 days ago
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Almost everyone seems to be working from home. But there are some jobs, which simply cannot be done from home like a plumber, carpenter, painter, doctors, sanitation workers, nurses, police, salesmen, beauticians, factory floor workers, hoteliers and so many more. In all this, have you wondered how an auditor can work from home?

If its routine examination of books, bank reconciliation and such, it still can be done. But complete audit before signing off the annual books? Auditors have a huge responsibility as their signature at the end of the statement of accounts is proof to the shareholders, investors, banks and other that they have examined everything and they opine that there has been no fraud or misappropriation of money. Yes, in recent times, given the number of scams that have come out, obviously, many auditors have put their ethical behaviour on the back burner, sold their souls and signed off wherever the management wanted them to, turning a blind eye to frauds and duping all associated with the company.

Now what is worrisome is that when there was no Covid itself, auditors were audacious enough but now, with most working from home, how have they examined the books? Especially, the external auditors. They are the one’s who give an ‘independent’ perspective on the accounts and their role is to ensure veracity of everything which the internal auditors and management have presented as truth.

Under normal circumstances, these auditors need to visit the company, its factories, meet with the personnel in the offices, visit the warehouses; their work is to cross check what is stated in the books and what they actually observe. But today, almost every external audit was done via phone and video calls.

So, in that context we cannot help but wonder about the veracity of financial statements of companies, when have been verified remotely, without physical basic checks. We cannot help but wonder how the auditors have managed to count inventory or company goods when they were not able to visit all the sites firsthand for months.

Most have worked out alternatives – majority say that they have examined goods and materials through a live video feed on their mobiles. Many said they have tracked the whereabouts of the inventory by using location sharing apps. Then the most widely used practice – use the earlier inventory to determine the balance at the end of the fiscal. And where auditors were not able to get access to paper records, they have asked the bank to scan the documents which they have on record and send them electronically.

When we say, “counting the inventory” the auditors themselves do not count one-by-one; its the clients who count but the auditors are supposed to observe in some capacity that the inventory counting procedure is proper and leads to an accurate count. Wonder how that was done remotely?

Personal interaction is imperative for an effective audit process. Though they say that they have talked with employees over phones and video calls, more than usual, there is really no way that they can raise red flags. So, auditors spent more time than usual, worked more than pre-Covid but the efficiency is no where near older times.

Well, lets assume with complete naivety and child-like innocence that our accounting and auditing standards are robust and the pandemic would not have affected the audit quality. That’s all that we can do at this point of time.

But yes, not everyone can work from home.

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