Q: How have you changed the way your staff and volunteers work with you, and the way you engage with stakeholders?
A: Like everyone, we’re confronting the challenge of keeping people motivated and maintaining the cohesion of the team. Our staff have been extremely flexible and adaptable. Of course, we depend heavily on the volunteers who make up our board and working groups, and we’ve been very conscious of the balance between their work lives and our work program. We quickly realized that we couldn’t keep going at the same pace as before, so we had to figure out ways to adapt.
As for our stakeholders, we had a board discussion in June about how standards should be implemented and executed so that it’s not overwhelming for the people involved. People can only absorb so much at a time and they have to prioritize, so we stretched the timeline on Quality Management slightly and delayed the comment period on Group Audits to accommodate that.
Q: What are stakeholders asking the IAASB about at the moment?
A: The major thing we’ve heard is that people need help to understand how our standards can address the current environment. We’ve had 16 formal meetings on COVID-19 with key stakeholders where we’ve shared information on how different regions are rising to the challenge of implementing our standards.
Q: What are the main auditing issues that have been impacted by COVID-19?
A: Clearly, professional skepticism at this time is key. Other topics that have been highlighted by events include auditor reporting, in terms of key audit matters and other related issues such as going concern that auditors have confronted. Auditing accounting estimates is a big issue as well.
The one that’s been popping up recently is reviews of interim financial statements, because this may be the first reporting period where entities need to reflect the effect of COVID-19. This wasn’t really on our radar, but more and more people have raised it with us and we’ve started to adapt our thinking; it will probably have a long-term impact on our agenda. These engagements entail more limited procedures, which gives rise to various issues, particularly with regard to how much work needs to be done. It has shown that our International Standard on Review Engagement, ISRE 2410, probably needs an update.
Q: How can audit quality be maintained during COVID-19?
A: The biggest issue in terms of audit quality is that if people think they’re going to use the same procedures and approaches as last year, we’re at some risk. Firms will need to adapt their quality control policies and procedures to the new environment; for example, how the work of the engagement team is directed, supervised and reviewed.
We also need heightened awareness of the possibility of fraud or error. At the moment there are increased opportunities, incentives and rationalizations for management or staff to commit fraud. There is also an increased risk of error, given that there have been many changes in the entity’s controls to adjust to working virtually. So it’s important for auditors to push hard on things that have changed in the entity, particularly around controls.
More than ever, communication with those charged with governance is an important factor. But paying proper attention to those issues could lead, I hope, to increased rigor and confidence in the world of audit.