Virtual Audit and Assurance Services: What Business Owners Need to Know About the Process
Virtual audits, which might also be called online audits or remote audits, have become increasingly prevalent for business owners looking for a convenient way to receive assurance services from CPAs. Understanding how virtual audits can be used, the pros and cons that come with the virtual audit process, and how you can prepare as clients to be ready for the auditors will help you be successful and able to move your business forward.
In this article, we'll break down the key aspects of remote auditing, the challenges you might encounter, and why we suggest a hybrid approach to mitigate any potential drawbacks.
What is a Virtual Audit?
A virtual audit is one that is conducted remotely. CPAs leverage technology to gather evidence from a business, communicate with their clients, and provide necessary auditing procedures while limiting or eliminating the need for physical, on-site visits.
Conducting a virtual audit enables auditors to assess the financial statements, internal controls, and compliance with a company anywhere in the country using digital tools. This can help match businesses with the right CPA for them without worrying about who might be available nearby.
What is the Virtual Audit Process Like?
The audit process looks a little different when clients are working with audit teams remotely. However, the basic steps remain the same.
Step One: Planning and Preparation
The virtual audit will begin with the auditors defining the scope for the organization based on their objectives and criteria for the assurance service. This may mean that they don't need a full audit, but instead need a review or compilation. This can be determined in early conversations and confirmed in the preparatory processes by the auditor.
Risk Assessment
The auditor will identify the potential risks and areas of concern they may encounter in the audit and tailor the process to address the risks for the company. These risks could be related to the nature of virtual work, such as data security issues, connectivity problems, or barriers to effective communication and building rapport. However, the risks can also be more general and be related to regulatory and compliance measures or documentation requirements.
Technology Setup
The companies and auditors involved in a virtual audit process will need to undergo basic technology setup steps to test and verify the reliability of the technology being used. The auditor or the organization need to create an account with a secure site used to share information.
Communication and Scheduling
Even when you are remote, it's important to stay in contact, often even more important compared to having more regular in-person sessions. Decide early on how you will communicate, how often, and set a virtual meeting schedule. Companies and auditors should agree on the digital platforms that will be most effective for the duration of the relationship.
Document Request
During this period, auditors will also provide a list of documents needed from the organization and provide a secure way for the business to transfer them over.
Step Two: Data Collection
Once the auditors have received the documents, it's time to remotely review them. This can include policies, financial records, and other important documents. From there, the auditor may schedule a video conference to interview key personnel and gather more information about internal controls and processes that may or may not be reflected in the documents.
Because the auditors won't be present in the office as much, they can rely on remote observation to observe the procedures and processes happening in the office. They can also use data analytics tools to find trends or anomalies in the data with which they have been provided remote access.
Step Three: Testing and Evaluation
After data collection, auditors will remotely test the effectiveness of internal controls, which may include doing a virtual walkthrough of the office or reviewing system access logs. Using remotely accessible financial data, the auditors will perform substantive tests to ensure it is accurate and complete. They can also run compliance assessments to ensure the organizational processes are aligned with relevant standards, industry regulations, and laws.
Step Four: Reporting and Following Up
The reporting process will include thorough documentation from the auditor on procedures and findings, and they will deliver a comprehensive report to the business that summarizes all the recommendations and key findings. From there, a conversation will happen between the auditor and the company, the auditor will monitor how well corrective actions have been implemented, and they can hold a closing meeting to wrap everything up.
What Technology Is Needed for Virtual Audits?
To ensure the virtual audit process runs smoothly, businesses and auditors need to have the following:
Secure, cloud-based document sharing and storage technologies.
Remote desktop access tools.
Video conferencing software, such as Microsoft Teams.
Secure communication channels that are at low risk of being compromised.
Data analytics and audit software.
Some of these tools are not just essential for virtual audits, but are important for every type of audit. Keeping clear lines of communication and streamlining reporting processes can make all audits run more smoothly. When choosing which technologies to use, all parties must keep data security top of mind. Communication should also be easy on these platforms to encourage regular, timely engagement.
What are the Pros and Cons of Virtual Audits?
While virtual audits can be convenient and effective for many businesses, they're not without their challenges. Here are some pros and cons companies should consider before starting a virtual audit.
Pros of Remote Auditing
Cost savings: Virtual audits remove most of the costs associated with travel expenses.
Efficiency: Documents can be shared easily between auditors and clients on a secure portal.
Flexibility: Instead of having to work around schedules, virtual auditing can be done with more flexible scheduling thanks to auditors having remote access to key information.
Cons of Remote Auditing
Loss of in-person engagement: There is the potential for the relationship to be less robust because the engagement is done remotely. This is why a hybrid solution can be better - more on that shortly.
Technology dependence: If some technology fails, the work can be delayed. Businesses also need to be technically proficient enough to work with the auditors remotely.
Security risks: If the business doesn't have adequate security measures, it may be at a greater risk of security breaches. However, this can be improved by consulting with the CPA firm on secure technologies that will work best for the engagement.
What is a Hybrid Audit?
Because virtual audits have their advantages and disadvantages, a good compromise is to have a hybrid audit, which combines virtual and on-site audit procedures. This means that businesses can benefit from the efficiency of virtual audits while still enjoying the advantages of in-person interaction and observation. This is a good middle-ground solution for many businesses.
Is Virtual Auditing Here to Stay?
It still feels fairly standard for businesses to look for accountants and auditors near them to complete assurance services for them, but with more innovations in remote technologies available and growing by the day, virtual audits are becoming easier to do. Doing a remote audit can be efficient, cost-effective, and more flexible for businesses and CPAs. The growth of remote work in general also coincides with the growth in virtual audits. So yes, we believe they are here to stay.
Are You Ready to Reap the Benefits from a Virtual Audit?
Are you prepared to receive a virtual audit? Consider getting ready with the following before you reach out to a CPA firm, or contact us with questions about what you need to be ready:
Confirm that your technology is secure and reliable enough for remote work
Ready your documentation on internal controls, finances, and other key processes
Be prepared to provide remote access to auditors, not just with communication, but remote desktop access, portal access, etc.
At OAK Advisors, we think virtual audits are just another way we can remain reachable to our clients. We offer hybrid services that include at least one in-person visit per year. This can consist of a casual meeting where we discuss your objectives and requirements and get to know each other better. From there, we will maintain communication channels virtually, being there for you when you need us the most.
Learn more by reviewing our audit and assurance services, or contact us to inquire about the process of working with us now.
