Auditing during COVID-19. New practices and solutions | Experts’ Opinions

ByCatalina Russu

Auditing during COVID-19. New practices and solutions | Experts’ Opinions

The corona crisis has impacted businesses and help is needed to support auditors in adapting their work on ongoing audits. According to a World Bank blog article, the Supreme Audit Institutions (SAIs) in the countries most affected by fragility, conflict, and violence (FCV) are facing particularly acute problems in carrying out audits during the COVID-19 pandemic. We have talked to several relevant international experts to discover some solutions as to how an audit should function in times of a pandemic and what the role of the international community is in this matter.

How should audit function in times of a pandemic? 

Muhammad Afnan Alam, public financial manager

“In many ways, COVID-19 represents an opportunity for all SAIs to increase or affirm their role as a critical governance institution and embark on audits that produce maximum value. SAIs are uniquely positioned to develop a report on “Whole of the Government response” in disease containment and prevention, healthcare optimization, and managing the socio-economic fall-out of the pandemic. In the context of fragile and developing countries, their work is essential as the pre-existing deficiencies in the government’s supply chain processes have been amplified by introducing the emergency procurement processes. SAIs need to directly engage with citizens to report suspected cases of mismanagement of COVID-related emergency spending. We have examples of US GAO and SAIs in New Zealand, South Africa, Sierra Leone, and Liberia who deployed an effective communication strategy to emphasize the role of SAIs and offered support to the government for a shift in thinking towards monitoring the control weaknesses in procurement processes.”

 

Theodora Messini, Technical Consultant – Tax Administration Adviser

“The COVID-19 pandemic has had tremendous impacts on economic, taxation, social and interpersonal welfare. Tax administrations are facing the challenge of lower than usual tax collections, while the need to protect public finances and limit the socio-economic consequences is high. Countries need adequate tax revenues to finance their efforts to restrain the negative economic impact of the measures against COVID-19 and audit can play a pivotal role in this. However, a traditional audit may prove to be ineffective. Use of reasonable commercial judgment supplemented by contemporaneous information is advisable whereas the traditional audit approach, which relies on past historical data, may prove to be inapplicable. Issues such as a huge drop in turnover, the handling of operational and exceptional costs, and price-setting will need to be dealt with under the prism of a unique incidence. The term “force majeure” which otherwise was easily passed in a written agreement may need to be thoroughly analyzed.”

 

Wilf Henderson, Former Technical Advisorto developing SAIs

“The SAIs have an important role to play in a pandemic. They should have encouraged governments to have established and tested disaster recovery procedures. SAIs should have audited these to establish how robust they were. If these have not been prepared, SAIs should:
– recognise that governments are operating in an uncertain environment and the level of risk has substantially increased;
– take into account that there will be a substantial inflow of funds, assets and supplies from development partners and that there may have been insufficient time to establish procedures to effectively manage them;
– work with government by undertaking independent audits that add value rather than looking to apportion blame;
– encourage governments to fully document any departures from agreed procedures and establish a basic control framework such as dual authorisation of expenditures or segregation of duties;
– produce balanced and fair reports based on evidence.
SAI management should ensure that risks to the wellbeing of staff are minimized.”

 

Sinem Hun, Gender, Tech, Migration & Law; Consultant; Entrepreneur

“COVID-19 has adversely affected the situation of communities living in fragile countries and conflict zones. Within these communities, the condition of women and girls has particularly worsened. Audits and any type of monitoring activities need to have a gender-responsive lens even in times of a pandemic. Collecting disaggregated data, ensuring a balanced diversification at focus group meetings and one-on-one in-depth interviews are some of the audit standards that should be designed upon the needs of disadvantaged groups. Whichever methodology is pursued by the auditor, it should have an intersectional dimension acknowledging the specific realities of fragile groups such as the disabled or migrant women or the LGBTIQ+ population.”

 

 

Talha Ocal, Development Finance Consultant

“The pandemic brought the world worsened economic indicators, volatility in markets, and forced changes in business models due to the accelerated adoption of technology. Auditors should have in place adaptation strategies to the “new normal” era. First, they should invest in technology and digitalization in audit processes in an attempt to enable auditors to undertake the complete audit cycle by remote working and with minimum on-site visits. Technological tools can make a remote audit possible which will bring the risk of overlooking problems in audited institutions. So, audit firms should manage the risks associated with being physically distanced from the audited. In addition, audit plans need to take into account the increased risks of institutions resulting from the pandemic.

 

Riadh Zaiem, audit expert

“The consequences of the actual crisis due to the coronavirus are numerous: economic, social, and regulatory. For a long time to come, travel will remain limited and work habits will change in order to meet new health requirements. Fraud will also be an all the more important issue caused by the feeling of the lack of supervision and transparency. Organizations are going to need to respond to the current crisis, but also to be prepared for those that may follow. It is up to internal audit to put in place procedures which allow greater flexibility and to rapidly develop new controls for short and medium-term management. In order for them to acquire legitimacy and efficiency, it is important to involve all stakeholders in the new processes and to adapt methods so that they coincide with the challenges of sustainability and safety. Whether for finance or compliance, team managers or operational staff, team collaboration via a common tool can be one of the keys to achieving this. The implementation of a transversal and centralized tool will even prove to be a real asset because the digitization of the audit makes it possible to overcome physical distancing.”

 

What should the international community do to facilitate audits in these difficult times? 

Muhammad Afnan Alam, public financial manager

“As shown by previous audits of crises, emergencies create environments where executives may try to weaken accountability and oversight systems in general, and specifically to the use of emergency funds. This may be a short-term or longer-term decline in accountability. Development partners need to work together to try to resist such attempts. Development partners may also usefully encourage the establishment of high-level mechanisms to unblock barriers to audit, such as efforts to deny access to accounting records.”

 

 

Theodora Messini, Technical Consultant – Tax Administration Adviser

“In terms of all the aforementioned concerns, the international community may play a crucial role. The exchange of information based on double tax treaties or an OECD inclusive framework, countries networking and conducting multilateral/joint audits especially for large taxpayers, may bring synergies, achieve economies of scale, and adopt a more holistic approach towards the unique challenges faced, increasing in that respect tax certainty from a taxpayer’s point of view.”

 

 

 

Sinem Hun, Gender, Tech, Migration & Law; Consultant; Entrepreneur

“The coordination of and communication among stakeholders and governments, the assessment of risks, and the monitoring of gender-responsive KPIs  are very important for the sustainability of mainstreaming efforts so the international community should aim to guarantee the physical security and wellbeing of auditors when they are mobilized on the ground, facilitate communication and remote auditing options if possible, be agile in identifying emerging gender-based risks, target a diverse range of beneficiaries, allocate sufficient funds for international audits specifically targeting women and girls and conduct gender-responsive procurement policies bearing in mind the needs of fragile groups.”

 

 

Wilf Henderson, Former Technical Advisorto developing SAIs

“The international community should understand that donations will be made in high-risk environments.  They should ensure that SAIs are provided with sufficient funding to undertake audits that ensure that these donations are properly accounted for.”

 

 

 

Talha Ocal, Development Finance Consultant

“The international community can assist the governments in their adoption of the “new normal” by financing SAIs to invest in the necessary technological tools and by technically supporting SAIs to perform additional audits in areas of increased risk in order to avoid fraud-related damage to institutions and economies in general.”

 

 

 

Check out more than 60 job opportunities in the audit sector here.