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In Brief
Public health measures taken to mitigate the spread of the coronavirus (COVID-19) pandemic have upended business operations and processes. Auditing is no exception; traditional methods of collecting audit evidence rely upon in-person procedures that are impossible or impractical now and for the near future. Technology provides a number of possibilities for remote virtual auditing; the authors describe several options, including remote inventory observation, document collection, and risk assessment.
The onset of the coronavirus (COVID-19) global pandemic has resulted in enormous pressure on auditors and accountants to find alternative ways to collect audit evidence and complete the engagement. Depending upon the assessed risk of material misstatement (RMM) and the materiality of a given account balance, auditors rely upon physical in-person evidence collection procedures, such as inventory observations, inventory verification, document collection, property, plant, and equipment (PPE) assessment, interviews, discussions, and observations. With the confinement brought on by COVID-19, is it possible to be an effective and efficient auditor?
This article will discuss remote virtual auditing-first-person view (FPV) cameras and drones, video feeds, artificial intelligence (AI) video assessment tools, and other technologies that can assist in conducting a remote audit examination. These methods offer several benefits, but they also present issues that must be addressed. In addition, audit risk assessment evaluations should be revisited in the current environment, where businesses and commerce in many industries have come to a halt and the unemployment rate rivals that of the Great Depression.
Audit Evidence Collection Procedures
Audit evidence is defined by U.S. GAAS as: "all of the information used by the auditor in arriving at the conclusions on which the audit opinion is based" (SAS 106; AS 15). This information consists of the accounting records themselves and all other information obtained during audit procedures performed during the engagement, in addition to records from previous audits and the firm's own quality control procedures (AU-00326.02).
Generally, audit evidence is more reliable if it is obtained from sources external to the entity, if it is in documentary form, or if it is obtained directly from the auditor. The reliability and quality (appropriateness) of this evidence forms the basis for determining the sufficiency or quantity of evidence that must be collected. The reliability and sufficiency of audit evidence needs to...