Auditing in the time of coronavirus — how Allworths and our clients fared in the pandemic

By Colleen Hosking FCA

Allworths Assurance & Advisory was last month named Best Auditing Firm (<$30M revenue) in the 2021 Client Choice Awards. It has been a great honor for my team to win this award, especially in what has been a strange and challenging year as global economies grappled with the COVID-19 pandemic. We thank our clients for the feedback they provided, and for their continued cooperation and support during the crisis.

After 30 years as an auditor, including 20 as a registered company auditor, I thought I had seen it all in the delivery of professional audit services to companies. But the COVID-19 pandemic was entirely new.

A majority of our clients very quickly began working from home, with staff taking turns to be allowed back into the office at various times. Most of our audit clients had remote working policies in place even before I had tracked down sanitiser for my home. It was very impressive.

For our team, frequent Zoom meetings were the most significant change in our day-to-day work. We as auditors are used to remote working, as we are often on-site at client premises, but in my 30-year career I had never before seen clients work from home to this level, at this scale. 

Our audit clients generally have excellent policies and procedures documented, including board charters, audit and risk charters, investment policies, finance handbook, employee handbook, delegations of authority, whistleblower policies and remote working policies. These have been critical in enabling staff to safely and effectively work from home.

Still, it is important that organisations have a strong back-to-office plan as pandemic conditions continue to improve. There is nothing like seeing people in authority in the office when it is practical — it inspires confidence in authority and emphasises the importance of adhering to control procedures. 

Clients with overseas subsidiaries tended to feel the impact of the pandemic more significantly as most other countries have not fared as well as we have in Australia. Shipping containers became a very valuable commodity as shipments were accumulating at wharves. Many shipments were delayed: only suppliers that were able or willing to pay higher shipping costs were able to move inventory in accordance with their expected shipping dates, which made cut-off testing complicated. In hindsight, we were fortunate that we did not see more legal disputes around this issue as most shipments were ultimately resolved, albeit maybe 6 weeks later than expected.

Overall, I think we have been lucky in Australia and I have observed our client reaction to COVID-19 was prompt and well executed. We just need to remember fraud becomes an increased risk in tough economic times, and we need to remain vigilant in monitoring internal controls. While I’m not quite old enough to have personally experienced the Wall Street Crash of 1929, that and the Black Monday Crash of 1987 offer important lessons on how the stock market can impact audit risk, off balance sheet transactions and accounting estimates.

I have seen some fraud during 30 years of audit work, but luckily at Allworths, our client acceptance model is exceptional. One memorable example from a former firm is a client that lost more than $3 million to fraud due to lack of segregation of duties between approval of purchase of inventory and supply of inventory (so that payments were automatically processed by accounts payable).

Personally, I was most affected by how the pandemic changed stocktakes. Because of COVID-19 restrictions, many of our stocktakes were performed using scanning equipment and filming, which was a very different experience to the stocktake audits I performed earlier in my career.

Back in the day when Occupational Health & Safety Guidelines were not quite up to today’s standards, I attended one of my first audit stocktakes. I had to count numerous pallets of bricks stacked 2 metres high. I was told to jump on the forklift and go to the top of each group of pallets as you could count better from the top. Thankfully, I was not afraid of heights but jumping from stack to stack was terrifying!

I am sure the factory personnel were playing a bit of a joke on the auditor back in 1989 but the experience made me remember: there is always a solution even when circumstances change dramatically during an audit. I kept that in mind during COVID-19.

If you would like to discuss this further please feel free to contact me on CMHosking@allworths.com.au or 02 9264 6733.