What Should Small Audit Firms Do During The COVID-19 Pandemic
The current situation in Kenya has affected small businesses in different ways. Many of them are struggling to survive amidst this crisis and their resilience tested and stretched to the limit. It’s inevitable that many small businesses will exit the stage as their survival is not guaranteed if the pandemic continues into the foreseeable future. Micro and small audit firms are no exception as they operate in the same economy. The effects of COVID-19 are devastating for these firms considering the timing of the pandemic.
Many audit firms started 2020 with optimism as they prepared to embrace the busy season ahead. The beginning of the year until around June is normally the busy season for audit firms because, for most companies, that is the period financial statement audits are undertaken for the year-end of December. It goes without saying that for most small audit firms, the busy season is their highest revenue earning period.
During the performance of audits, audit staff mainly operate from client sites in order to scrutinize and verify documents at the client business premises. This allows auditors to engage with client staff directly, ask the relevant questions and receive appropriate responses. Of course, the audit process is more than just that but presence at client premises and access to not just client documents but also client staff is a critical part of an effective and efficient audit process.
With auditors and client staff working from home, many firms are facing challenges on how best to carry out assignments. The existence of the normal reporting deadlines and tax payment and returns deadlines makes the situation even more precarious. This calls for adjustments to the way audit assignments are delivered while considering staff safety and adherence to health guidelines issued for all Kenyans. It also requires a balancing act between effective delivery of services to clients and meeting quality standards as specified by the International Standards on Auditing (ISAs). This dichotomy presents a significant challenge for auditors to address if they are successfully to mitigate the risks attaching to their engagements under the current circumstances.
The first challenge is how firms remain productive and continue to deliver important audit, tax, and advisory services when their employees are not in the office. One solution to this problem is the use of technology. There are many solutions that can be deployed to effectively manage assignments and teams offsite. The use of audit software that allows for remote login and working by staff or a cloud-based solution will certainly ease work for firms.
Employees can work on files offsite while allowing managers and partners to review their work from any location. Audit software could be considered an expensive affair by many small firms but considering the situation and the need to look into the future, it may be a worthwhile investment. Currently, an ICPAK provided software is in the market that can be used by the small firms. These firms could perhaps engage ICPAK to significantly reduce the price of the software in order for firms to deploy it during this pandemic.
The use of audio-visual communication for meetings between audit teams and clients is also another means for communication and information exchange. Emails are also critical for communication and data sharing between the teams and client staff. If remote access to client servers and information can also be available, it would definitely make the audit process efficient. It’s important to note that data security and confidentiality be maintained during this period. Technology must be deployed in a manner that protects information provided by clients.
Firms can also leverage on technology to save time and money during this pandemic. Presentations and meetings that could have involved travelling out of town to another location can easily be held online via Zoom, Skype and other means. This will save the firm the time required to travel not to mention the related costs of that travel. If this becomes the new norm, then technology can continue to simplify work for these firms even post COVID-19.
Where technology is absent or not sufficient, auditors could either request clients to bring their files to their offices or send some staff to client premises for documents review. In this case, social distancing and staff safety must be observed. In either case, proper review of staff work must be undertaken whether working from home, office or client premises to ensure audit quality is not compromised.
It’s important to note that, while times are difficult for auditors, times are also difficult for clients and therefore, client management is paramount. Auditors must understand that the client business is affected significantly by the pandemic and it’s not business as usual. Clients are dealing with serious loss of revenue, escalating costs and diminished cashflows amongst other problems.
Auditors must therefore stand up to be counted by providing solutions to ease client problems and be flexible and understanding during this difficult audit period. Where difficult conversations like business continuity and going concern is to be heard, auditors must guide their clients accordingly. Changes to deadlines and targets for delivery of audit assignments resulting from the current situation must be communicated to clients in advance.
Another critical aspect is staff management. Working from home is very difficult even for the staff as the environment at home may not be conducive for a difficult task like audit. Firms must provide whatever assistance required by staff to ensure that they can deliver from whatever location they choose to work from. The anxiety and fear of travel between home, office and client premises during this pandemic could also affect staff productivity. Firms, where possible must provide a safe mode of travel for their staff.
Where firm cash flows don’t allow for salary payments or a reduction in pay, the same must be communicated to the staff in a kind and professional manner so as not to affect their morale. Staff retention is a key aspect during this period especially if the firm has spent a lot of time and resources to train and skill the staff. Online training and materials could also be provided to employees to keep them abreast of changes in law especially tax laws and they could be encouraged to read on materials relevant to their work as auditors.
The need for every firm to undertake rigorous business continuity and crisis planning is critical. A lot can be learnt from the challenges of COVID-19 and firms must adapt to changes quickly in order to survive. Firms must reinvent themselves by looking at new and better ways of conducting their business that makes them more resilient. It remains to be seen how effectively auditors will be able to meet the myriad of additional challenges thrown up by the COVID-19 pandemic.
In the end, change will be inevitable.
About the Author
Abdi is a highly Experienced Auditor and professional consultant with unparalleled expertise in tax advisory, corporate finance, audit of corporate and government institutions, business strategy formulation and implementation. policy and governance, donor-funded agency compliance, SME support including review of business process, setting up systemic Structured and financial management training.
Abdi is an exemplary leader with an extensive track-record in leading dynamic across the region, delivering stellar results in number of complex projects undertaken.
He has over 20 years’ experience in the field of Audit, Tax, advisory and consultancy providing services to a wide range of clients in different industries and the region.
Abdi is a qualified accountant (FCCA) and a CPA (K). He a member of the association of Chartered Certified Accountants (ACCA), UK and is a practicing member of the Institute of Certified Public Accountants of Kenya (ICPAK).
Abdi is currently pursuing his PHD (Accounting) at the University of Nairobi and holds an MBA (Strategic Management) and a Bachelor of Commerce (Finance) from the same university.
Abdi is the Managing Partner of Umuro Wario and Associates.