Coronavirus: A challenge to auditors
The global coronavirus pandemic has left businesses around the world, temporarily closing their doors in an effort to tackle the spread of the virus. Global shares are taking a hit, and economic growth is on the decline, and the number of people filing for unemployment has hit a record high. There are also strict lockdown enforcements that everyone must comply with for safety purposes, thus posing a lingering challenge before companies and their auditors when it comes to performing an inventory audit.
Also referred to as a stock audit, inventory audit is an accounting process that takes into consideration a company’s total stock of physical goods. It is a particularly important process in manufacturing companies, where raw materials need to be converted to finished goods. Inventory audit is quintessential to maintaining a healthy business. The generally accepted procedure of going to the client’s site to observe the inventory cannot be followed anymore. COVID-19 is making attending inventory counts impractical for auditors in many countries around the world.
Under the current circumstances, inventory counts are probable to be canceled or delayed. Even while being performed, auditors may not be able, willing, or permitted to attend. In situations like these, auditors should seek to perform alternative audit procedures. If it is not absolutely necessary, the audit can be put off until a later time taking into account the health and safety of workers. But in these testing times, there are a lot of other possible alternatives that need to be recognized.
Roll Back and Roll Forward Procedures:
The cutoff date for a rollback concurs with the financial reporting period. The auditor rolls your database back to the cutoff date by inspecting timestamps to remove any transactions postdating the cutoff. Any inventory received after the cutoff will be removed, and any inventory removed after the cutoff will be added back. The result will be a database reflecting your inventory status on either the start or end of the financial reporting period.
In places where there are no significant restrictions on movement, an arrangement for a count to be performed before the year-end can be made, which will enable auditors to perform testing procedures afterward and audit the intervening period, reconciling the inventory counted with the year-end inventory.
Use remote Video equipment:
Have trained personnel use video equipment at the inventory warehouse, and the auditor can perform the required tasks while observing inventory remotely, as long as there are no health threats to the personnel on-site. A live video feedback can also be utilized for a two-way interactive audit process. Technology, such as drones or remotely controlled robots, might help with your inventory testing in some cases, but you should consider legal restrictions on the use of such technology in close proximity to people. There are a lot of challenges in this method as well, like connectivity issues, experience with videography, or authenticity of the video. Appropriate steps must, therefore, be taken for the same.
The above article explores alternatives that can be followed by auditors when faced with unprecedented challenges during the time of coronavirus. If you have any queries, feel free to comment in the section below. Happy Learning!
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