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Principles
In times of crisis or emergency auditors are still expected to conduct audits in full compliance with audit standards, even under challenging working conditions. Balance is needed between ensuring flexibility in working arrangements, while minimising risks to audit quality.
Instructions
The issues summarised below relate mostly to the International Standards on Auditing (ISAs), which are an integral part of INTOSAI’s auditing standards framework (the IFPP).
Risk identification and assessment
An auditor always needs to determine how to obtain an appropriate level of understanding of risks, and identify and [link title="assess%20those%20risks" link="%2Faware%2FGAP%2FPages%2FCA-FA%2FPlanning%2FAudit-risk-and-risk-assessment-procedures.aspx" /]
. This is particularly challenging for new auditees, and for existing auditees who have undergone significant change since any previous audit. In times of disruption – such as during crises – the auditor will need to reconsider frequently the risk identification and assessment during the audit. Similarly, the auditor will also need to reassess judgements made during earlier phases of an audit concerning risks, [link title="materiality" link="%2Faware%2FGAP%2FPages%2FCA-FA%2FPlanning%2FMateriality.aspx" /]
, and the use of [link title="experts" link="%2Faware%2FGAP%2FPages%2FSpecific%2FExternal-experts.aspx" /]
. Auditors may also need to review communication channels with those charged with governance, or at least review earlier established procedures. Further guidance can be found in [link new-window title="ISA%20315%20Identifying%20and%20assessing%20the%20risks%20of%20material%20misstatement" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520315%2520(REVISED%25202019)" icon="file-pdf-o" /]
.
Audit evidence
Limited access to [link title="audit%20evidence" link="%2Faware%2FGAP%2FPages%2FAudit-evidence.aspx" /]
may lead to limitations of scope in which case auditors may need to consider [link title="modified%20opinions" link="%2Faware%2FGAP%2FPages%2FCA-FA%2FReporting%2FModified-opinion.aspx" /]
or consider other engagement terms. Auditing remotely may affect the timeliness of obtaining audit evidence not only from the auditee, but also from third parties (such as [link title="bank%20confirmations" link="%2Faware%2FFA%2FPages%2FExamination%2FExternal-confirmations.aspx" /]
). Auditors may need to adjust their audit approach and develop alternative procedures, particularly with auditees to whom access is restricted. [link new-window title="ISA%20500%20Audit%20Evidence" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520500" icon="file-pdf-o" /]
provides further details. For a suggestion how to include a disclaimer in an audit report, see [link title="scope%20and%20approach%20section%20examples" link="%2Faware%2FDocuments%2FScope-and-approach-example.docx" icon="file-word-o" /]
.
Quality review
[link title="Independent%20quality%20reviews" link="%2Faware%2FGAP%2FPages%2FIndependent-quality-review.aspx" /]
may be affected by an increase in the number and different nature of significant judgments being made by engagement teams, which should be factored into the time needed to undertake the reviews and follow-up on any outstanding issues.
Going concern
This may be a key focus of many ongoing and forthcoming audits given the uncertainty about the global economy and the prospects for many auditees to continue business as before, or to wind up their business on an orderly basis. [link new-window title="ISA%20570%20Going%20Concern" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520570" icon="file-pdf-o" /]
covers these issues, and management’s assessment of going concern may need to include:
- updating forecasts and sensitivity analysis as considered appropriate, considering risk factors identified and different possible outcomes;
- reviewing of projected covenant compliance in different scenarios;
- changing management’s plans for future actions;
- expanding disclosures;
Taking these into consideration, the auditor needs to consider the impact of the company’s financial situation, and its ability to continue as a going concern, on any opinion (see below) or conclusion.
Presentation and disclosure
Presentation and disclosure in financial statements will need to be audited to assess if it is appropriate under the circumstances. This will include an analysis of any description of relevant risks, [link title="estimates" link="%2Faware%2FFA%2FPages%2FExamination%2FAccounting-estimates.aspx" /]
and judgements applied. Auditors need more than ever to consider the coherence of information between the financial statements and other information presented by auditees. This is covered in [link new-window title="ISA%20720%20The%20auditor%E2%80%99s%20responsibilities%20related%20to%20other%20information" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520720%2520(REVISED)" icon="file-pdf-o" /]
.
Audit opinions
A key audit matter disclosure related to additional audit work may be needed. For instance,
Observations
Where extra work has been carried out to allow observations to be made about the consequences of the crisis or emergency, we recommend applying the following principles:
More than ever, observations must be presented using [link title="consistent%20and%20accurate%20terminology" link="%2Faware%2FGAP%2FPages%2FReport-style.aspx%23Consistency" /]
.
Subsequent events
Crisis or emergency events that occur after the balance sheet cut-off date need to be considered as a [link title="post%20balance%20sheet%20event" link="%2Faware%2FFA%2FPages%2FExamination%2FSubsequent-events.aspx" /]
. Auditors need to exercise care to ensure that any documentation provided to them reflects the situation as, and when, an audit report is to be signed or an opinion given, and should consider the impact where auditees have obtained extensions to statutory deadlines. See [link new-window title="ISA%20560%20Subsequent%20Events" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520560" icon="file-pdf-o" /]
for further details.
Practicalities of remote auditing
Resources
Applicable standards
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Specific considerations
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Applicable standards
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Impact on the assessment of audit risks and procedures
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[link new-window title="Paragraphs%2031" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520315%2520(REVISED%25202019)%23page%3D15" icon="file-pdf-o" /] [link new-window title="and%20A151%20of%20ISA%20315%20(revised)" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520315%2520(REVISED%25202019)%23page%3D53" icon="file-pdf-o" /]
[link new-window title="Paragraph%2025%20of%20ISA%20330" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520330%23page%3D7" icon="file-pdf-o" /]
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Access to client’s premises, personnel and documents. Quality of audit evidence.
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[link new-window title="Paragraph%206%20of%20ISA%20500" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520500%23page%3D3" icon="file-pdf-o" /] & [link new-window title="ISA%20705" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520705%2520(REVISED)" icon="file-pdf-o" /]
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Physical inventory counting
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[link new-window title="ISA%20501%2C%20paragraphs%204%20%26%206" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520501%23page%3D3" icon="file-pdf-o" /]
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Accounting treatment and disclosures in the financial statements by the reporting entity
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The impact on impairment of assets, write down of inventory to net realisable value, fair value adjustments, going concern and related disclosures both within and outside the financial statements in accordance with [link new-window title="ISA%20540" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520540%2520(REVISED)" icon="file-pdf-o" /] , [link new-window title="ISA%20570" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520570" icon="file-pdf-o" /] and [link new-window title="ISA%20720" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520720%2520(REVISED)" icon="file-pdf-o" /] .
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Disclosures of other information included in the auditees’ annual report
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[link new-window title="ISA%20720" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520720%2520(REVISED)" icon="file-pdf-o" /]
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Communications with those charged with governance
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[link new-window title="ISA%20260%20%2C%20paragraph%2016" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520260%2520(REVISED)%23page%3D5" icon="file-pdf-o" /] >
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Going concern
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[link new-window title="Paragraphs%20A7" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520570%23page%3D11" icon="file-pdf-o" /] [link new-window title="%26%2011%20of%20ISA%20570" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520570%23page%3D5" icon="file-pdf-o" /]
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Subsequent events
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[link new-window title="ISA%20560%2C%20paragraph%206" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520560%23page%3D4" icon="file-pdf-o" /] [link new-window title="%20%26%20A9" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520560%23page%3D10" icon="file-pdf-o" /]
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Auditor’s report
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[link new-window title="ISA%20705" link="https%3a%2f%2fwww.ifac.org%2fsystem%2ffiles%2fpublications%2ffiles%2fIAASB-2020-Handbook-Volume-1.pdf%23INTERNATIONAL%2520STANDARD%2520ON%2520AUDITING%2520705%2520(REVISED)" icon="file-pdf-o" /]
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Links to main external sources
[icons-list icon-size="2" separator="line" icon-vertical-alignment="middle" vertical-alignment="middle"]
[icon-list-item title="Accountancy%20Europe" link="https%3A%2F%2Fwww.accountancyeurope.eu%2Fprofessional-matters%2Fcovid-19-resources-for-european-accountants%2F" icon="external-link" linking="new-window" /]
[icon-list-item title="IAASB" link="https%3A%2F%2Fwww.iaasb.org%2Ffocus-areas%2Fguidance-auditors-during-coronavirus-pandemic" icon="external-link" linking="new-window" /]
[icon-list-item title="IPSASB" link="https%3A%2F%2Fwww.ipsasb.org%2Fpublications%2Fcovid-19-relevant-ipsasb-accounting-guidance" icon="external-link" linking="new-window" /]
[/icons-list]
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