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How COVID-19 has impacted the auditing process

COVID has significantly impacted the financial industry and the way in which audits are conducted, in turn creating new and unique challenges and adding another layer of complexity to the auditing process.

Businesswoman having online business meeting

COVID has significantly impacted the financial industry and the way in which audits are conducted, in turn creating new and unique challenges and adding another layer of complexity to the auditing process.

Traditionally undertaken in-person and onsite, the limitations around COVID and social distancing restrictions resulted in the majority of audits being undertaken online and digitally during lockdown. 

Importance of quality financial reports

According to DFK Laurence Varnay Director, Faizal Ajmat, the evolving nature of COVID has seen an increasing emphasis placed on the quality of financial reporting. 

“The financial environment has been constantly changing from one reporting period to the next due to the challenges of COVID and companies working remotely,” he said.

“As a result, this has significantly impacted how we audit a company’s asset values and financial position and makes it essential that businesses disclose any key assumptions they’ve made during the auditing process along with any risks and predicted future earnings.”

“On top of this, we now also have to consider the impact COVID-19 has had on a businesses earnings and whether this has been factored into the risk assessment undertaken by management,” he said.

Key areas of focus

As auditors, one of the key areas we focus on is going concern, working with clients to assess how their business has been affected by COVID and the ongoing impact on their business’s performance and profitability.

In particular, the following areas are a key auditing focus as a result of COVID-19:

  • Asset values
  • Provisions
  • Solvency and going concern assessments
  • Events occurring after year-end and before completing financial reports and
  • Disclosures in the financial report and Operating and Financial Review (OFR).

For some businesses, the impact of COVID has seen them move closer to or into insolvency so in order to avoid this, we encourage clients to work with their management team early on to identify any key risks while establishing a clear direction for the business going forward.

Accessing client data

Even before the global pandemic reached our shores, the auditing process was undergoing a revolution thanks to technological advancements that were reshaping the way in which audits were being undertaken.

With the majority of businesses moving to a remote working model during COVID, the process for accessing client data had to be adapted quickly and saw our auditing teams access financial data electronically. This has had a huge impact on our auditing services, with an increasing emphasis on online auditing. 

Although the online format reduced the face to face interaction with clients, we implemented new client touchpoints and used video conferencing platforms such as Teams or Zoom to maintain strong client relationships. We continue to offer clients the option of online or on-site audits depending on what is best for each clients’ needs.

For more information on how COVID has impacted the auditing process, talk to our team today about developing a robust financial position to help meet your financial goals.

 Faizal Ajmat

About the author

Faizal Ajmat has almost two decades worth of audit experience across Australia and the globe.

Operating within partnerships and Authorised Audit Companies for many years, Faizal is a quick adapter to changing environments, landscapes and industries. Faizal joined the DFK Laurence Varnay team as a Director in 2016 and has quickly become a trusted and reliable auditor for many of our clients.

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