Strategies for managing audit risks associated with a pandemic

As specialists in almost every industry on the planet, because of the coronavirus pandemic, auditors have experienced a tremendous interruption to their daily activities.

But the severity of the fallout of the pandemic will only begin to become apparent as communication teams prepare plans for future consumer feedback and audits for 2020 and conduct simple practises such as audit sampling.

At the AICPA ENGAGE 2020 online conference in July, Lynford Graham, CPA, Ph.D., a consultant in Short Hills, N.J., is expected to lead the ‘Audit Methods for Greater Performance’ and ‘Audit Sampling-Not It’s Rocket Science’ workshops. He clarified that the lessons that auditors have learned over the years from dealing with consumers would mean very little in 2020.

“You may have to rip up this year’s usual strategy and start fresh,” said Graham. “You have to look at this business as it is in 2020.”

Many public sector audits and certain private company audits use a control-based methodology, which Graham said depends strongly on the willingness of a customer to retain adequate financial management controls over the year. It also has the advantage of saving the inspector from having to perform a large amount of substantive research at the end of the year.

But in 2020, such a control-based approach could not be feasible.

Were those checks really in effect throughout 2020? ‘Asked Graham. Perhaps they were in January; perhaps they were in December. But what about the time in the middle? Did any of those safeguards slip by the wayside when the key entities were not there and company procedures changed? ”

The possibility that the safeguards of a client will be less reliable than in previous years will also determine how the interaction team approaches its sampling of customer accounts.

“If you don’t get your leverage from your controls or if fraud risks are identified, the sample size that you used for your substantive revenue test and cost tests last year may have to be raised quite significantly,” Graham said.