Raising reporting and audit quality during a pandemic

THE Covid-19 pandemic has presented an array of challenges for businesses against a backdrop of heightened uncertainty and lockdown restrictions. Organisations have been pushed out of their comfort zones to reconfigure how they operate and the audit profession has had to keep up.

In the current climate, good corporate governance is more important than ever and the pressure falls on auditors to assess "going concern" and associated disclosures to help businesses navigate a new normal.

As businesses settle into this new reality, finance professionals have the opportunity to further demonstrate their role as trusted advisors, in traditional ways such as addressing "going concern" and viability or navigating remote auditing, as well as in ways reflecting the current evolving environment such as leveraging new innovations to pave a new future for the industry and supporting ongoing global issues such as climate action.

Understanding "going concern" is the bedrock underlying better decision-making for businesses.

According to a study by the Accounting and Corporate Regulatory Authority, the Institute of Singapore Chartered Accountants, the Singapore Exchange Regulation and Singapore Institute of Directors, it is of great importance, with 48 per cent of respondents pointing to "going concern" and liquidity as their main worry during the pandemic.

In the face of a new paradigm, "going concern" assessments developed prior to the pandemic or in its early stages may no longer be fit for purpose and need to be revisited.

Finance professionals can be instrumental in helping businesses understand and plan for these changes. This include helping businesses manage and forecast cash flows during prolonged periods of reduced revenues, strategically planning how to emerge stronger from the crisis and preparing financial statements that adequately disclose material uncertainties.

Not only will this serve as an important step to help organisations assess and benchmark their businesses, it can also establish trust with customers, partners and investors who can feel assured that they are receiving accurate and timely information about business performance.

While some audit firms may be familiar with remote working, most are only starting to find their footing now. With many working from home, or in a hybrid work environment, auditors need to find new ways to remotely conduct essential routine checks such as inventory observations, systems tests and management inquiries.

For example, if they use new technology such as drones or remotely controlled robotics to conduct audits, they need to consider limitations such as the individual controlling the device, risks in the manipulation of video footage, and if other methods are required to assess the condition of the inventory.

Auditors should consider new methods of maintaining and documenting compliance in electronic document management platforms, with the help of secure cloud-based systems and seamless shared workspaces.

Our new digital reality has amplified businesses' exposure to digital vulnerabilities including cybersecurity risks and fraud. Locally, six in 10 organisations reported at least a 25 per cent increase in cyberthreats since the onset of the pandemic, highlighting the importance for auditors to request, store and maintain sensitive documentation in a secure manner.

THE ROLE OF TRUSTED PARTNER

In the fight against fraud, finance professionals can also offer valuable insights into preventing and detecting different types of fraud.

Apart from digitising documents to streamline information sharing, auditors have to consider how to engage new clients through digital means, with 61 per cent of respondents in the Institute of Chartered Accountants in England and Wales's Future of Work survey highlighting that building new relationships remotely is a key challenge.

With digital now increasingly driving growth, auditors and finance professionals should look at how they can adopt emerging technologies such as artificial intelligence, data analytics and blockchain to bring about greater operational efficiency and financial inclusion.

As technologies such as automation open opportunities for spotting data anomalies more quickly, this can free up time for auditors to think, innovate, apply their judgement, and draw insights from data.

Moving into the role of trusted partner for their clients, finance professionals can focus on providing strategic counsel and big-picture thinking, including ensuring that ethics and good professional judgement are used in decision-making.

The pandemic may have granted some businesses the opportunity to press "reset" and consider how they can contribute to building a world of stronger and more sustainable economies.

As trusted advisors to governments and businesses, chartered accountants are ideally positioned to help organisations make sustainable and long-term contributions to the fight against climate change.

Finance professionals should continue to play an important role in educating businesses on climate risks and opportunities and providing counsel on how sustainability can be integrated into operations by managing climate-related financial disclosures and risk reporting.

The bar has been raised for reporting and audit quality as we move towards a new normal. With many organisations looking for guidance on how to reconfigure how they operate once they return to business-as-usual, finance professionals must play a key role in helping them address their going concern, tackle new, digital challenges and guide them on their sustainability journeys.

• The writer is managing director international of ICAEW.