IN 2022 during our audit planning period, we have not yet cleared the fog on whether field audit would be possible for 2022 financial statement audit.
For almost three years, everyone tried to regain balance after the Covid-19 pandemic caught us off guard. We, as auditors, were suddenly stuck in front of our computers, busy with our mobile phones contacting clients or booking couriers to transport documents, engaged in endless virtual conferencing, constrained to send countless emails and trapped within the corners of our offices. With the incredible benefits of technology, the field audit work was bypassed and surely, audit may be completed in the convenience of our offices or homes. As auditors, we started contemplating — can we absolutely drop audit field work?
Early this year, with the Covid-19 restrictions being loosened, my audit team decided to conduct hybrid (online and onsite) audit procedures. This got us all wiggled with excitement. Finally, we can go out and meet our clients after almost three years of just seeing them on our computer screens.
So, we arrived at the airport, and the client who engaged us during the pandemic came to pick us up. Upon arriving at the client's office, we were taken aback by its physical state. We did not expect that the office was almost worn out by time, outdated in contrast to its actual positive financial status. With this, onsite audit really gives us an actual and full view of the client's state in general that we cannot see through our virtual screens that may be critical in making our audit conclusions.
Onsite audit may also reveal omissions and oversights or lapses of the clients. During one of our trips, a client failed to provide us with copies of correspondence bearing essential information affecting the company's capital structure. The information was not recorded, thereby substantially misstating the company's financial statements. This required my team to make further necessary disclosures and modification of our audit report. This would have been missed out if our audit was confined virtually.
Undoubtedly, the benefits of onsite audit are unparalleled vis-à-vis offsite audit. As such, as auditors, we should not be trapped to the convenience and advances of technology, and do away with the relevance of onsite or field work.
Through onsite audit, we gain the opportunity to get to know the auditee better and build a better relationship. We can have a better assessment of the client's well-being and true state just like what we have experienced. It also allows us auditors to have a greater understanding of the clients' operations and a view of its business functions.
Onsite audit also enables us to perform tests of controls and walkthrough procedures of the clients' processes. With virtual audit, it is more challenging to perform these procedures since in some instances, auditors may not necessarily know what to look out for. Virtual audit allows clients or companies to dictate what we see and can very easily by-pass things they do not want to show just like what we experienced with our client who initially failed to provide us with an essential document.
Likewise, there are certain tests of details that require physical presence at the clients' premises to be effective such as cash count and physical inspection of a company's assets and products. These procedures require actual observation to come up with a more reliable audit result.
The Covid-19 pandemic paved the way to the auditors' creativity to conduct audits even in a remote place through advances in technology. As auditors, we gained and learned from this experience that we may not have foreseen in the first place. In a way, it should have made us more well-rounded, open-minded and resourceful auditors. Nonetheless, the passing of the pandemic with the imprints of technological audit innovations should not let us substitute or bury the traditional and yet essential field audit and its unparalleled benefits.
---------------------------------------------------------------------------------------------------------------------------
Enrico D. Tabag is the managing partner of EDT & Co., CPAs and an assistant professor at the University of Santo Tomas Alfredo M. Velayo College of Accountancy. He is also the chairman and CPA reviewer in taxation of PRIA-ARC CPA Review Center. The views and opinions expressed in this article are the author's and do not necessarily reflect those of these institutions.
