Australia’s audit standard setting chief is flagging possible changes to the way auditing standards look following the impact of the coronavirus pandemic on the way auditors fulfil their role.
Professor Roger Simnett, the chairman of the Auditing and Assurance Standards Board, observed that the pandemic has resulted in auditors being forced to work remotely using technology given the strict social distancing rules imposed by the Federal, State and Territory governments to avoid the spread of the coronavirus.
He told Banking Day that changes in the way auditors perform some of their processes and procedures may forever change aspects of the way in which audits are conducted.
“I think that the pandemic in this situation has probably like many others has possibly changed the way auditors do their job going forward. I could see a much greater role, for example, on technology and how you access information remotely. If that’s been working well and that’s been possibly a push, we can see that as becoming a new norm in auditing standards,” Simnett observed.
Simnett and the team at the AUASB have spent the past few months working on coronavirus pandemic related guidance with the Australian Accounting Standards Board.
The first publication was a general overview of accounting and audit judgements directors, managers and auditors will need to make when financial statements are being prepared – or audited in the case of auditors – with pandemic impacts in mind.
A second publication on a more contentious issue – that of going concern – has preoccupied the AASB and AUASB staff. The guidance has been deemed necessary to ensure that people understand the legal, accounting and auditing requirements with which directors and managers and auditors engaged to conduct an external audit of an entity must comply.
The going concern overview, which does not replace the legally backed laws and standards from which much of the detail is drawn, also outlines the various issues that people must consider including the differences between the solvency test – can an entity pay its debts as they fall due – and the crystal ball gazing of going concern.
Going concern relates to whether the directors of an entity believe it can trade on into the next reporting period.
The publication, which is due for imminent release, also touches on key areas of accounting judgements and critical disclosure items that directors, managers and auditors must keep in mind.
Simnett says that there are lessons that educators will be able to learn from this period such as the role technology has played during the pandemic. New ways of conducting audits and obtaining evidence for audit judgements will also generate research opportunities for academics wanting to explain how auditors responded to the challenges of working remotely on client engagements.
“What we have found is that the principles of auditing standards have stood up very well and the principles of accounting standards have stood up very well,” Simnett said.
“It is sort of the procedures and new and innovative procedures and different ways of thinking about things, which is very important for educators to get across in the current environment.”