COVID-19 is having a tremendous impact on both our personal and professional lives. Companies in most industries are faced with having employees work from home, special safety requirements for those that still come in, possible supply chain issues, and often a severe reduction in demand for their products and services. Thus, we are seeing record spikes in unemployment.
Socially Distant Auditors
Essential industries such as first responders (medical, fire, police, etc.) have also suffered a spike in demand and are finding shortages in the workforce capacity and materials. Supply chains for our food and medical supplies have been pushed to their limits. While sufficient food supplies exist, grocery stores are finding it difficult to keep supplies on the shelves.
Finally, the latest catch phrase must be dealt with. “Social distancing” requires us to limit, or if possible, eliminate, face to face interactions. Travel has come to a near stop and many airlines have reduced their flight offerings by up to 90%. Company meetings, customer meetings, and many other group activities have been severely restricted.
Given the above, how are auditors to cope? Amidst this crisis it’s the auditors that could find additional savings for struggling companies; identifying waste, abuse, and fraud in operations and supply chains. Much like our counterparts in the businesses, we must look at what is available and determine how effective we can be by implementing alternate audit techniques. Communication systems such as Skype, Zoom and collaborative ERM platforms must be used to share information and keep communications and interpersonal channels open.
Connect via Telecommunications
For those that have greater access to company data (e.g. an ERP environment), we can spend time designing and implementing more data analytics that allow us to focus on areas that appear to have inconsistencies. For instance, we can look across the company to see if certain locations have several purchase orders with dates after the corresponding invoices. Perhaps there’s a vendor that has the same address as a current employee on the payroll, identifiable by cross-referencing vendor data and payroll data. Data analytics can give the management team a particularly good perspective on where business processes are working as designed. We can do the analytics remotely, which saves on travel costs, eliminates any face to face interaction and involves little disruption to the business.
Another area that is used with greater frequency are targeted surveys. Much like the data analytics, we create surveys to address a specific area / process across the company and perform a comparative analysis. Surveys are highly customizable to specific risks identified and can be distributed widely and on short notice. Combined with data analytics the accuracy of the survey answers provided can be assured. We can then focus on those locations that have unexpected results either in the data or survey answers.
Embracing Platform Usage
During this crisis, equipping auditors with the right remote auditing tools is crucial. Digital Risk & Audit platforms are helping organizations maintain compliance & Quality standards, ensuring full control of operational risk, all form the comfort of their home. As remote auditing comes to the forefront during this pandemic, auditors everywhere will need a centralized platform that can effectively standardize all operations. Ensuring a comprehensive but flexible process to identify, assess, mitigate, and monitor critical risk enterprise-wide.
Focus on Key Controls
While various companies employ different styles of auditing, we use a risk-based process. This includes determining the highest risk processes that drive the business and then mapping these processes out. The next step is to document the specific risks, key control mechanisms to mitigate the identified risks and finally conduct testing to ensure those controls are indeed effective. Digital tools have proven to be a practical method of remotely gaining process understanding, sufficient and easy to use, which allows us to flowchart the high-risk areas. This is one newer technique that is being used to reduce audit costs (travel) and to allow greater flexibility in meeting with our clients. This flexibility has proven to be extremely well accepted.
Targeted key controls identified in the flowcharting process may be tested by requiring evidence. Instead of testing 20 transactions from one location, consider testing a handful of transactions from each location at some interval. This assists in providing reliance that the controls identified are in fact working. Many companies are moving toward a digitized storage of key documents that auditors may be able to access and review without any assistance from local management. This can be a great way to establish reliance on the key controls.
As you can see, there are many ways to adapt to our new environment. Being flexible and adding value are key. Discuss with management and the Audit Committee the changes you are planning and the associated benefits.
About the Author
Stephen Young is the Managing Director of Risk Navigation Group, Inc. and currently acts as the Chief Compliance Officer and Vice President Internal Audit of MacLean-Fogg. Stephen has been a Compliance and Audit professional for most of his career and has assisted many companies in establishing and / or improving these functions. He has served as both a consultant and as a full-time employee.
Stephen’s past clients / employers have spanned a variety of industries including transportation, financial services, manufacturing, pharmaceuticals, gas and oil production and telecommunications. These clients range from Fortune 500 down to relatively new start-ups. Stephen’s risk-based approach and common sense solutions have made him a highl sought after resource.
AuditComply is an Enterprise Risk Management platform. An integrated risk management solution revolutionizing the way enterprises manage, analyze & report on critical risk.
AuditComply operates in highly regulated industries such as Automotive, Aviation, Food & Beverage, Oil & Gas, Finance, and Manufacturing with key fortune 500 clients situated throughout the UK, EU, US, Middle East and Asia Pacific regions.