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COVID-19 implications for group audit engagements

With COVID-19 causing major disruption to businesses around the world, group audit teams will need to carefully consider the financial reporting implications of the virus while proceeding cautiously and diligently with their work.


Accepting new engagements

As always, the group auditor will be responsible for evaluating new projects. This means analysing internal evidence to determine if an appropriate process can be put in place to gather the financial information needed to complete a group audit engagement. The ongoing pandemic may affect this step in numerous ways. Both group auditors and component auditors may find themselves unable to perform necessary tasks due to travel limitations and other restrictions imposed on businesses by governments.

If the group auditor concludes that it won’t be possible to gather enough evidence for a new engagement, it should not be accepted. If the group auditor comes to the same conclusion regarding any ongoing engagement, the team should consider withdrawing from it if such an action is permitted under the relevant laws and regulations.

For audits that can be carried out, the team will have to carefully adapt their processes to the evolving situation.


Involvement with component auditors

To complete a group audit, the group engagement team must work closely with component auditors.

Component auditors can help the group auditors understand the internal workings of the business and review all of the relevant financial records. Group auditors also need to revise the component auditors’ plans and overall strategies.

As the pandemic may have had a dramatic impact on finances, there is a risk of displaying inaccurate information in reports. To prepare for this possibility, the group and component auditors need to work together to create appropriate risk evaluation measures. They must also design and deploy additional processes that will allow them to complete necessary work, despite the disruptions caused by COVID-19.

Obviously, in-person meetings may not be possible – or advisable – at this time. Auditors can use technology to overcome these limitations; meetings, for example, can be held by videoconference. If regulations permit, e-copies of crucial documents can be circulated to the appropriate people. Auditors can also review files together by screen-sharing. Use of virtual machine and cloud-based software can further expedite this process.

The evolving COVID-19 situation may indeed cause further unexpected disruption and alter the group engagement team’s ability to work with component auditors. But clear communication and effective use of digital technologies should let auditors remain agile enough to complete the audit.


Additional considerations  

COVID-19 may prevent the group engagement team from testing group-wide controls, meaning that audit strategy may have to be adjusted accordingly. If such an adjustment to the plan is made, the group must keep all component auditors informed.

The group engagement team may also be unable to closely review component auditors’ workpapers. Again, this task can often be done through digital means. However, the latest best-practice guidance no longer requires the group engagement team to review workpapers, as a completion document may be sufficient.  

Finally, the group engagement team may need to perform subsequent event procedures if component auditors are unable to work or if the COVID-19 situation changes. 


Finding a way forward

The current crisis is forcing many workers to fundamentally change their approaches – and auditors are no exception. But by leveraging digital technologies and their wealth of expertise, business acumen, critical thinking, and communication skills, auditors can shrewdly reject or select engagements and complete them to a high degree of quality and assurance.

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