Pandemic accelerates need for audit reform

Pandemic accelerates need for audit reform

CIIA says crisis stressed need for reform, but auditor warns timing could be wrong

Pandemic accelerates need for audit reform

A study published by the Chartered Institute of Internal Auditors (CIIA) shows that internal auditors were unable to carry out critical work during lockdown – an issue which has increased the urgency of an audit reform, according to the CIIA’s chief executive John Wood.

“The coronavirus has had a profound effect on internal audit and corporate governance more widely across all sectors in the UK,” says Wood. “These findings underscore the urgent need for the government to accelerate the pace of audit reform in the UK to help strengthen corporate governance.”

The report revealed that 46 percent of UK internal audit teams have been affected by redeployment during lockdown.

Wood says the government must move faster in bringing forward a comprehensive reform package.

“The time for reform is now well past due,” he says. “During a time of crisis, it’s expected that the internal audit team may be redeployed to support other areas of the business and go where they’re most needed. In our view, it just demonstrates a recognition of the quality of the internal audit teams, and the value it can bring because internal auditors have special skills.”

He argues safeguards should be put in place to reduce the risk of conflict of interest and to preserve the independence and objectivity of internal auditors.

Nathan Tucker, senior manager internal audit at Liberty Global, yet argued that whilst a reform in audit is needed, the timing is not right.

“Now is not the time to fast track this. Instead, now is the ideal time to fact find and plan,” he said, via email.

As audit teams and businesses have undergone a significant amount of change in the last six months, the pandemic has shown a need for audit to be more innovative, embrace technology, and be more proactive and forward-looking, according to Tucker.

“Businesses and auditors need to work better together to educate one another more. Proper planning and collaboration can better identify risks, determine how we will respond and address each of these risks through audit testing and using audit resources more appropriately,” he said.

Despite challenging the status quo, the coronavirus has had little effect on audit work in the short-term.

This year’s crisis has impacted audit on the long-term. Tucker argued remote working has created distance between audit teams and the auditee as remote auditing provides more time for the auditee to respond, meaning risks that would previously have been easily identified are now less apparent.

“Audit teams will need to ensure complacency has not set and we ensure we are asking the right questions and receiving the right information to adequately assess and respond to risk,” he said.

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