Remote Auditing: The Basics, Pros, and Cons

Since the COVID-19 pandemic started, we have been doing our best to keep up with the rapid changes in the Internal Audit industry. We interviewed Chief Audit Executives across the country (which you can read here and here), to learn first-hand how they were adapting. We also looked into industry trends and explored the changing training environment. In this article we want to explore the new world we are entering, as quarantine is being lifted. Though many are headed back into the office, auditors have learned that remote work solutions are here to stay!

As the world became chaotic around us earlier this year, Internal Auditors were pushed to work remotely, upending a lot of the conventional wisdom about what an Internal Auditor’s job should look like. Similarly, external auditors found themselves in a completely new world. With clients shutting their offices down, audit fieldwork has been successfully completed from home offices. The traditional model of living out of a suitcase and working at client sites may get a significant update when all is said and done!

Perhaps one of the positive developments of the pandemic is that audit departments are finding new ways to work, and doing so more quickly than we might under normal circumstances. This could positively impact our abysmally high turnover, and help many auditors attain work-life balance.

But I’m an “old school” auditor. I believe that regardless of technology, necessity, and changing attitudes, there will always be benefits of auditors and auditees being face to face. It is important to ask some key questions to determine if remote auditing is ideal in each situation. What are some proven strategies to work remotely? When is remote working appropriate? And when is an in-person meeting the best option, despite all the obstacles in our way? 

Remote Auditing Works!

When the pandemic first became serious, and working from home became the norm, the key question on many auditors’ minds was which projects on their annual audit plan could most easily be completed in isolation. Some common examples I heard were projects that could be classified as consulting, such as legal function reviews, records retention audits, website compliance reviews, corporate culture audits, validating complex accounting models, etc.

Auditors also used this time to complete critical tasks that are often neglected, such as creating or updating audit policies, procedures, charters, and job descriptions. Some auditors took this time to prepare quality assurance self-assessments, quality assurance and improvement programs (QAIPs), or create long-range strategic plans for their departments.

As social distancing turned into a full-blown quarantine for most of us, we were forced to think outside the box. The tasks that were low-hanging fruit for distance working were completed, and auditors became very fairly concerned that their reduced presence could result in harm to their companies. With auditors working from a bunker, is there a higher risk of theft, fraud, misappropriation, and malpractice? While Internal Audit is not the control, we would be remiss if we didn’t ask these questions and adapt our plans to the risks in our environment.

Luckily, there is anecdotal information that creativity and innovation have won the day. Many auditors have found that remote working is not only possible, but that auditors can add a lot of value and often work more efficiently.

Examples of Remote Auditing

Auditors whose companies have invested in laptops, electronic workpapers, and document imaging were at a clear advantage when working remotely became the norm. The more information auditors have at their fingertips, the more remote auditing is possible.

One of the most impressive examples of remote auditing I’ve heard since the pandemic started was remote branch auditing. By utilizing FaceTime and security cameras, auditors we know were able to observe a branch’s controls, operations, and even count cash! I was really skeptical when I first heard about this, but upon reflection realized the surprise element of the branch audit is alive and well. It would be nearly impossible for a branch employee to perform a fraudulent cash count on camera. This approach allows auditors to spend less time on the road traveling from branch to branch, reducing costs in addition to limiting contact.

Another example is having auditees perform a full self-assessment prior to any audit work being performed. This is a new approach to auditing altogether. On the surface, auditors may be inclined to dismiss this approach. However, when you delve further, the benefits become more apparent. Why not just come out and ask the auditees to assess their own work? While some people will not be objective, others will. This can help an auditor prioritize, figure out what problem areas deserve closer and in-person attention, and which tests can be performed safely from a distance.

The most common audit task that went virtual is meetings. In fact, many of my friends and colleagues across industries have expressed amazement and frustration at the number of meetings they are now attending, despite being on lockdown. Technology solutions such as Zoom and WebEx have made this possible, but the simple conference call shouldn’t be dismissed. These are all great options to limit in-person committee meetings, or even board meetings, which have always presented a logistics challenge.

The Cons of Remote Auditing

I would be a hypocrite if I only discussed the cost savings and efficiencies of remote auditing. There are drawbacks as well, some obvious and some sneaky.

If you’re a regular reader of this blog, you know that John and I are huge fans of auditors showing up. Recently on a virtual presentation call, I preached to a group of auditors about attending as many company events and functions as possible. Sometimes, auditors are treated as outsiders. Auditors should always attend company parties, volunteer at sponsored charity events, and run or walk with your fellow workers in company sponsored races. If you make your presence known it is a lot harder for anyone to deny Internal Audit a seat at the table. This lesson applies to in person auditing as well. Sometimes you have to get in their face to be acknowledged!

One clear benefit of being in the room with your auditees is your heightened senses. Sometimes people say all the right words, but their ticks and demeanor can give away that not everything is as it seems. Interview subjects who have something to hide often avoid eye contact, constantly fidget, adjust their seat and clothing, and otherwise show you that they are uncomfortable. While these things are not impossible to catch via phone or video, they are spotted very easily in person.

Another aspect of auditing is that, in a strange way, it can bring different parts of your company together. I have worked in financial institutions for most of my adult life, and held positions on the frontline and back office sides. I can tell you from experience, and from many of my peers, that the branch/corporate divide is real. If auditors stop going to branches altogether, it is just another way that the frontline team could observe they are treated differently from everyone else. Hopefully your company makes many efforts to help geographically remote workers feel included.

Do your part as Internal Audit in making all aspects of the company one team… Audited equally!

It’s About Balance

While remote auditing can and should be explored, our industry will never be 100% virtual. The benefits of having personal contact and connections with auditees is simply too important. Once the pandemic is over and behind us for good, consider going on a corporate “tour” and spending some of your time with the different teams and locations at your company. Re-introduce yourself to employees you haven’t seen in a while. Work somewhere else for a day or two, and I guarantee you’ll learn something new and interesting about your company and the people who keep your lights on!

Have you implemented remote auditing at your company? How did it go? What lessons did you learn? What will you keep when work restrictions are lifted? Leave a comment and tell us about it!

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2 Responses

  1. We had our examination done entirely remotely. While it was really quite smooth, it was also more work for me as the ‘coordinator and cat herder’ and we’ve had 11 examiners on site at once before. Having more folks at home does have an advantage though, the responsiveness of the team was better than I’d ever seen! The NCUA site was a little quirky but still worked well, and the examiners were good about creating submission files to keep it organized (it’s usually one big open place for docs)

    My team has been entirely remote for a few years, only in the office in ‘hoteled’ workspaces when we were hosting examinations or outsourced audits, so we had that added benefit of having electronic documents. It was nice to have only one thing we could not provide in its entirety as the department only started imaging the work for 2 of the 3 months reviewed.

    I do agree with the in person aspect on a lot of the more sensitive topical information. I’m hopeful we’ll get back to that fun soon!

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