Assessment Cover Sheet

Student ID Number/s: Student Last name/s: Student First name/s:

Course: Master of Professional Accounting School: Business

Unit code: MA611 Unit title: Auditing

Due date: 26 May 2023 Date submitted: Campus:
Lecturer’s Name: Michael De Martinis Tutor: Michael De Martinis

Student Declaration

I/We declare and certify that:

1. the work contained in this assessment is my/our own work/group work, except where acknowledgement
of sources is made;
2. this assessment has not been submitted previously for academic credit in this or any other course;
3. I/we have read MIT’s Plagiarism and Academic Misconduct Policy and Procedure, and I/we understand
the consequences of engaging in plagiarism, collusion and contract cheating;
4. a copy of the original assignment is retained by me/us and that I/we may be required to submit the
original assignment to the Lecturer and/or Unit Co-ordinator upon request;

I/we have not plagiarised the work of others or participated in unauthorised collaboration or contract cheating
when preparing this assessment.
MIT ID Signature Date

For Assessor Use Only (if not marked on Moodle)

Name: Michael De Martinis
Position Lecture/Tutor
Date:
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“Research Report on
the Impact of COVID-
19 on Auditing”
the names of the ‘Co-authors’ and team members
Executive Summary
COVID-19 has significantly impacted auditing, with remote auditing practices becoming universal,
accelerated digital transformation, increased focus on risk assessment, fraud detection, changes in
accounting and reporting, heightened regulatory scrutiny and the need for enhanced communication
and coordination. It has also called for making it necessity adapting to remote technologies, emphasized
the importance of transparent financial reporting and challenged professional skepticism and will be
used in upcoming audits, post pandemic. Future of auditing will be expected to be shaped, reliance on
technology, leading to long-term changes in audit processes and a heightened focus on adaptability and
resilience in the face of future disruptions.

Introduction
COVID-19 has created a situation of uncertainty. Countries had sealed their borders and sent
people indoors. In short these risks have started to pose challenges both operationally and financially.
As early, pandemic effects world had come to a standstill, causing global downturn and brining in new
risks for companies. COVID just emerged with a huge situations of uncertainty that made the companies
to re-evaluate the risks with greater clarity. The indications of adverse consequences of COVID-19 on
reporting companies has already been observed and implications of these consequences is seen post
pandemic. Liquidity crunch, resource constraints, under-utilized assets, legal and contractual non-
compliances, existential concerns and other range of challenges were present there during COVID-19.

In the process of providing an independent opinion on financial statements to financial reporting

process Independent auditors play an important role. The COVID-19 crisis and related economic
uncertainty present a unique set of challenges for auditors. Including effective and efficient approach
and appropriate and timely audit reports with quality, as well as, stakeholders demanded quality audits.
The auditors were expected to put in, in COVID, and post COVID-19 environment, huge and more
extensive efforts while conducting the audits engagement. Audit related risks due to COVID-19 and
including this risk in planning and audit strategies were not included by auditors preliminarily.

Field of auditing has had majorly impacted by COVID-19 , sharpening and shaping
the way audits are processed and conducted and the challenges auditors face during conducted audit.
Disruption of Audit Processes: Traditional audit processes are disrupted by pandemic, specifically those
requiring physical presence at on site at client. Restrictions in travelling and lockdown in countries
measures made it difficult for auditors to conduct on-site visits and obtain necessary supporting and
evidences. Implementing remote auditing procedures and relying more on technology was to be
adapted by auditors to communicate with clients and gather information.

Remote auditing practices are adopted by auditors due to pandemic. Virtual audits were more
shifted trends due to pandemic, data analytics tools, leveraging video conferencing and secure
document sharing platforms. while ensuring the safety of auditors and clients, remote auditing allowed
audits to proceed better than it can ever be in that situation. However, there were certain challenges as
remote auditing technique was used in terms of access to reliable data, verifying the authenticity of
documents and establishing effective communication channels.

Businesses were under significant risks and uncertainties due to COVID 19. Assessing the impact of
the pandemic on financial statements, evaluating going concern assumptions and addressing
uncertainties in the business environment had to be evaluated by auditors due to increased risk and
uncertainty. Exercise professional judgment and consider additional disclosures in financial statements
to provide stakeholders with a clear understanding of the potential effects of the pandemic was to be
induced due to the heightened risk and uncertainty.

Changes in Accounting and Reporting requirements were there leaded by COVID 19 and its after
effects would be causing this requirement to be done. Accounting standards, such as those related to
lease modifications, government assistance programs, and impairment assessments and other such
related standards Auditors had to be adapted by auditors. Assessing the recoverability of assets and
evaluating the impact of government support on the entity's financial position and other unique
circumstances caused by the pandemic also had to ensure that financial statements accurately reflect.

Auditors had to assess the effectiveness of internal controls in mitigating new risks as remote work
arrangements and changes in business operations were introduced. Controls related to remote access,
cybersecurity and the integrity of financial information had to be understood and evaluated by auditors.
Any control deficiencies and impact of those deficiencies on their assessment of the reliability of
financial statements had also to be considered.

The pandemic posed challenges to Maintaining audit quality, performing the procedures with a
limitation caused by pandemic and exercising professional skepticism were also a challenge for auditors.
Professional skepticism is a fundamental principle in auditing that requires auditors to maintain an
attitude of questioning and critical evaluation of audit evidence. During the COVID-19 pandemic,
professional skepticism has played a crucial role in addressing the unique challenges and uncertainties
faced by auditors. Auditors had to be alert to the Risks of fraud, management bias and the potential for
fraudulent financial reporting were present as same even they were heightened due to pandemic and
not possible of conducting audits on sites of client. Remote auditing made it more challenging to
observe physical evidence, observing the procedures of conduction of routine business work of client
and assess the credibility of information. Auditors had to adapt their new situation based procedures
and use advance and uplifting technology efficiently and effectively to maintain the quality of their
audits and address these challenges.

Financial statement assertions such as existence, valuation, completeness and presentation has
been affected by pandemic. Auditors have had to examine these assertions more vigilantly and
diligently, considering the potential impacts of the pandemic on revenue recognition, impairment of
assets, provisions for losses, fair value measurements and other such sensitive areas that could be
affected regarding this situation. Professional skepticism has been essential in challenging
management's judgments and assumptions to ensure the accuracy and completeness of financial
statements.

Effective or even minimum needed communication and coordination became hard and crucial
during the COVID 19. To gather necessary information, address audit issues, resolving and reconciling
those issues identified and ensure timely completion of audits, auditors had to work closely with their
clients. Establishing clear communication channels and saying better and advanced technology for
virtually done discussions and meetings had to be done audit in respect to conduct better overall audit.
Building trust and maintaining strong relationships with clients had also became even more essential in
a working in remote environment.

All the guidance and updates provided by regulatory bodies and professional organizations
provided to address the unique and un-faced challenges faced by auditors during the pandemic had also
to be followed and complied with. Auditors had to keep up follow to these guidance and developments,
form and adapt their audit systems and procedures accordingly and ensure compliance with new
requirements of those regulatory bodies and professional organizations. As the impact of the pandemic
unfolds, requiring ongoing monitoring the environment of guidance and regulation continued and
adapted by auditors.

Risk of fraud due to economic uncertainties and changes in business operations has had been
highlighted due to COVID 19 and its implication include intentionally misstating the financial results.
Auditors have had to be particularly skeptical and vigilant in detecting and addressing potential fraud
risks. Examining the effectiveness of internal controls, examining unusual or unexpected transactions
and using data analytics tools to identify anomalies or patterns that may indicate fraudulent activities
had been major procedures which were compulsory due to this risk and mitigating the fraud risk.

There are certain impacts that COVID-19will have on the future of Auditing . Field
of Auditing is already majorly affected by COVID-19, and it will continue reforming its future in different
ways. Here are some potential impacts of COVID-19 on the future of auditing:

Adoption of remote auditing is boosted due to pandemic. Technology is being relied upon by
auditors to conduct remote audit, leveraging video conferencing, data analytics tools, and secure
document sharing platforms. This trend is likely to continue and auditors will be allowed due to this to
work from anywhere and reducing the need for on-site visits.

Importance of digitalization in Audit is highlighted because of COVID-19. The need to enhance

their infrastructure and invest in advanced data analytics capabilities is uncovered by firms of financial
and forensic audits. Large volume of data is now analyzed quickly by auditors due to automated and
technology driven process allowing and giving access to auditors to evaluate large data rapidly and more
efficiently.

Various operational and financial risks are recognized by multiple organizations as due to
pandemic. Risk assessment will be prioritized by auditors in their audits to identify vulnerabilities and
assess the effectiveness of risk management processes. Resilience of business continuity will be
assessed, potential problems relating to future will be evaluated.

Risk of fraud has been increased due to economic uncertainty resulting from the pandemic.
Preventing fraudulent activities during audits will need more vigilance and detection risk skepticism.
Advanced data analytics tools to identify anomalies, patterns, and potential fraud indicators in financial
data will be done using advanced data analytics.

The financial performance of many businesses is significantly impacted by pandemic and many
businesses are not stabilized even after COVID as their major strength and assets were consumed.
Crucial and important role will be played by auditors in assessing the impact of COVID-19 on financial
statements and ensuring appropriate disclosures are made. Going concern assessments, impairment of
assets, and fair value measurements and such areas will be under high focus after pandemic and its risk
effects.

Changes in regulations and reporting requirements would be there due to economic

consequences of the pandemic. Auditors will need to stay updated on any new regulatory developments
and adapt their auditing procedures accordingly. To ensure the integrity of financial reporting in the
post-pandemic period, there might be an increase in rules and regulations and audit inspections. Ability
to comply with new emerging and highlighted laws and regulations and meet the heightened
expectations of law makers, regulators will be demonstrated by auditors.

Adoption of remote collaboration tools and technologies has been accelerated due to pandemic
and will continue to be used in future. Video conferencing, virtual meeting platforms, and cloud-based
document sharing to facilitate communication with clients and team members have been utilized by
auditors. These technologies have not only enabled remote auditing but also streamlined audit
processes, improved efficiency, and allowed for effective collaboration. Auditors will likely to continue
embracing and getting benefit from these remote technologies based applications and system even
beyond the pandemic.

The use of remote collaboration tools and technologies is necessitated just due to COVID pandemic.
Auditors are likely to continue using these technologies, which can improve efficiency, streamline audit
processes and facilitate efficient and effective communication with audit clients and audit team
members.

Risk of fraud will be increased post pandemic in organization where audit during COVID-19
introduced auditors with intentionally misstatement of management because of remote working
arrangements and economic uncertainty. Auditors will need to enhance their ability to detect and
prevent fraudulent activities during audits. Auditors will need to assess the effectiveness of internal
controls in detecting and preventing fraud, especially in remote work environments even after
pandemic.

In conclusion, there has had far-reaching impacts of COVID-19 pandemic on the field of auditing.
Traditional audit processes are disturbed due to this, necessitating the adoption of remote auditing
practices and the increased reliance on technology. Auditors have faced high risks and uncertainties,
needing them to critically apply professional skepticism and assessing the effects of the pandemic on
financial statements. To address the distinctive circumstances caused by the pandemic changes in
accounting standards and reporting requirements have been introduced. Internal controls have come
increased examination, and auditors have had to adapt their procedures to solve and address the
challenges of remote work environments. Effective communication and coordination have become
paramount, with auditors relying on digital tools and establishing clear communication channels.
Regulatory bodies have provided guidance to address the challenges faced by auditors during the
pandemic. Looking ahead, these impacts are expected to shape the future of auditing, leading to long-
term changes in audit processes, the integration of technology, a heightened focus on risk assessment
and fraud detection, and a greater emphasis on resilience and adaptability in the face of future
disruptions. Auditors will need to navigate these changes and adapt their practices to continue providing
reliable and insightful audit services in the post-pandemic era.
References:

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Levy, H. B. (2020). Financial reporting and auditing implications of the COVID-19 pandemic. The CPA
Journal, 90(5), 26-33.

Vijayakumar, A. N., & Nagaraja, N. (2012). Internal Control Systems: Effectiveness of Internal Audit in
Risk Management at Public Sector Enterprises. BVIMR Management edge, 5(1).

Glover, S. M., & Prawitt, D. F. (2014). Enhancing auditor professional skepticism: The professional
skepticism continuum. Current Issues in Auditing, 8(2), P1-P10.

Firth, M., Rui, O. M., & Wu, X. (2012). How do various forms of auditor rotation affect audit quality?
Evidence from China. The International Journal of Accounting, 47(1), 109-138.

Vona, L. W. (2012). Fraud risk assessment: Building a fraud audit program. John Wiley & Sons.

Bauer, T. D., Humphreys, K. A., & Trotman, K. T. (2022). Group judgment and decision making in
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