The Nonprofit Perspective on Remote Auditing



Concerns regarding the quality and efficacy of audits amid the coronavirus pandemic emerged early on, with detractors of remote auditing detailing all the myriad ways in which it could all go horribly, horribly wrong. Certainly, there are fault lines that are seemingly easier to trip over in person, from antiquated technology to suspicious behavior, but in our recent interview with Laurie Horvath, CPA, partner at Baker Tilly, MICPA board member and Nonprofit Task Force member, it all comes back to standards.

“I think it’s forced us – in a really good way – to revisit what audit standards are, what an audit is, and to make sure that we’re not over-auditing,” Horvath says of the overall effect of the pandemic on the auditing process. While there are lingering risks, she adds that, “This year we just kind of reacted to virtual auditing, and to doing things remotely, but now we can plan for it. So, now instead of scanning a 400-page document, maybe we can think about what other audit evidence might suffice.”

While speaking about all the ways the pandemic has changed the auditing process, Horvath explains that a major advantage of remote auditing in her sector, not-for-profit (NFP) organizations, is the ability to erase geographical boundaries. Especially when it comes to the very specific, niche aspects of NFPs and a specialist is necessary. “That ability to bring in the very best people and not be bound by geographic parameters is definitely making for a better audit process.”

Indeed, remote auditing as a concept was becoming more common before the pandemic, the Journal of Accountancy reports. Today’s CPAs have access to computer-assisted audit techniques, electronic workpaper binder systems, robotics, and data analytics to name a few. Moreover, generally accepted accounting standards (GAAS) have established measures regarding the sufficiency and relevance of audit evidence to keep risk acceptably low and rarely dictates or limits how that evidence can be obtained1.

Still, Horvath points out that there is a difference between auditing and accounting, which can be easy to forget when heightened anxiety over controls is prevalent. “I think as people are nervous about controls in a remote environment, clients and board members put a lot of faith in the audit process and it’s really important to remember what the auditors are charged with, that we’re looking to make sure the financial statements are clear of material misstatement…that we still have a risk approached audit that considers a threshold of materiality.” She cautions, “We want to do a good job, but we can’t be charged with redoing the fiscal year activity and seeing if we get the same amounts. That’s not an audit, that’s accounting.”

Further, on tracking the issue of fundraising and assessing those risks from a virtual standpoint, Horvath suggests that fundraising dollars have been easier to track during the pandemic as cash and checks ceded ground to electronic transactions. “We haven’t been going to the big events that are the bread and butter for a lot of our clients, so they’re looking at different kinds of fundraising,” Horvath explains. “Some of these platform systems and other solutions have better controls than [with] people writing checks or handing over cash at events. So, [that] part of it has really improved and I think it’s going to evolve, and auditors are going to be in the backseat as clients look to fill some of these big funding gaps.”   

As far as missing those in-person cues, Horvath cites the sharp increase in accessibility remote auditing has enabled among board members and CEOs. “In virtual audit meetings with clients and board members, non-profits are seeing record attendance among board members and committee members…It’s so much easier for a board member to click into a Zoom link than to drive 45 minutes.”

For an auditor sharing results with a board, Horvath says that seeing such an increase in participation is thrilling for both Baker Tilly and their clients. “I’ve asked if we can continue that one thing (virtual meetings), because continuing that will make us so much better.”  

Not only are stakeholders more involved, but their organizations are also realizing the value in more efficient processes and letting go of antiquated systems. Horvath states, “As people weren’t able to physically sign a check or initial an invoice, the strongest nonprofits have really challenged their whole system and improved it to make it work best, instead of just working.” According to Horvath, nonprofits are thinking differently and focusing on what controls they are trying to achieve, the best path to realizing that control, and determining who is most qualified to carry it out.

“A lot of controls can be done by anybody,” Horvath explains. “You don’t need an accounting degree to match amounts on an invoice to a check.” These practical tactics to improve efficiency is something the accounting profession, being a conservative industry, would not have otherwise realized without the impetus of the pandemic, Horvath notes.

Which brings up a point raised by MICPA CEO Bob Doyle in a recent discussion on the power of gratitude in the face of adversity. Horvath herself is a self-proclaimed optimist, finding opportunities for positive takeaways amid what has been one of the most challenging eras of modern business.

When asked about finding that positivity, Horvath reflects and says it all comes back to gratitude. “We can never minimize that so many people lost their lives and so many people are dealing with misfortune, and never, never would you want this. But it happened. And how selfish of us who are healthy to not take the super powerful lessons that came from it and turn it into our tomorrow with a dose of gratitude for having endured the process. I’m so grateful.”

  1. Mahbod, Reza & Mike Fredrickson. “Overcoming Site Visit Limitations in the Pandemic.Journal of Accountancy. 08 May 2020. Accessed on 08 Feb. 2021.

Source: MICPA

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