BUSINESS BEYOND COVID
MARK STEWART: Continuous auditing may be one of the many changes in the way businesses operate beyond Covid-19
As the pandemic permanently changes the way we work, flexibility will be central, though personal engagement will still be needed in some cases
In the Business Beyond Covid series, CEOs and other business leaders and experts in their sectors look to the future after Covid-19. What effect has the pandemic and resulting lockdown had on their industries and the SA economy as a whole? Which parts will bounce back first and which will never be the same again? Most importantly, they try to answer the question: where to from here?
No industry is untouched by Covid-19, and the audit profession is no exception. If we remained stable during this time it is because we play a critical role in society, built on trusted relationships with our clients and people. This is the clearest measure of what sets more resilient organisations apart.
Covid-19 and the national lockdown have not been kind to business. Even as the lockdown has protected many South Africans from harm, it has also inevitably set many industries back. While some of our clients may find themselves exposed now, we’ve been able to continue to deliver audit services without having to make any staff or salary cuts. So, while I confess this has somewhat surprised me, I am confident that our efforts to future-fit how we work as an organisation and how we engage with our people and clients are bearing fruit.
That said, I don’t think any organisation, in any sector, can say confidently they weren’t (and still aren’t) worried about the business effects of the pandemic. Even essential services businesses that kept operating throughout the lockdown have projected reduced profits because of supply chain restrictions on nonessential items. It is a stark reality that comes with limiting economic activity in an already constrained economic environment.
Much of the stability we are seeing in the audit sector is because we are a mandated service in terms of regulatory reporting requirements. Auditors play an essential business role as verifiers of financial information, helping to ensure the truthfulness of a company’s financial activities to its shareholders, customers, employees and regulators. With or without a lockdown, this is critical, and the system must continue to function effectively.
Our audit teams have been able to do much of their work remotely during this time of physical distancing, though we also recognise that audits cannot be completed at a distance indefinitely. Fundamentally, auditing means hearing and therefore listening — sometimes to what is being said, sometimes to what isn’t. The ability to judge nonverbal cues and interactional styles and access evidence beyond just what is handed to us are part of the audit process.
Our professional judgment and scepticism have become even more important since Covid-19. Many businesses are fighting for their liquidity and are experiencing high debt levels just to remain going concerns. To ensure there are no material misstatements and to provide the assurance that the industry expects from us, we’ve had to all remind ourselves that, despite this difficult time, we need to apply the standards and guidelines of our regulators. We serve our clients but cannot be advocates for them. Rather we must work for the public’s interest, serving all those who have an interest in a company’s performance.
Still, a large part of our work is building client relationships. People trust us to be comprehensive, efficient and impartial in our work, and as with any business this takes time and can’t be done through videoconferencing calls alone. Retaining and acquiring new business has a strong personal component to it, and even as technology has helped us remain efficient and productive over the lockdown, it is too sterile to replace face-to-face engagement.
As the world of work changes permanently, this is likely to result in a rise in continuous auditing, which enables audits to be done throughout the year rather than en bloc with larger teams. This could reduce many time-intensive tasks at the traditional year-end audit and may give auditors more time to focus on understanding a client’s business and industry better. Continuous auditing supports physical distancing better and could mean improved risk-assessment procedures and control checks that happen more frequently. That said, it does bring with it some initial set-up costs. There will always be a need for human assessment and experienced professional judgment in interpreting the data points.
We’re also likely to have more flexible ways of working when the lockdown is over. Some companies have already made working from home a permanent option for their employees because they’ve seen equal or greater productivity from it, perhaps too much so as many employees have reported feeling more stressed and burned out. In some sense, I think this is due to the anxiety of a recessionary economy, where job security is less certain. But it’s also because working from home doesn’t physically separate “home life” and “work life” like an office would. It’s harder to know when to stop working and disengage, there are no more moments of running into colleagues in the stairwells or at the coffee station. It’s all work, all the time, which will never be the path to efficiency and increased productivity.
To give our people maximum flexibility we will define working hours and locations on an individual basis, recognising that many of our staff have time-sensitive responsibilities outside work, such as home schooling or being a single parent. If you can create a working culture that recognises each other’s humanity, one where the demands of the profession and the demands of our lives outside the office can be held in balance, where you can recognise the whole person and not just their business function, you’re able to unlock a new kind of value that is more resilient to the challenges of this moment.
For my part, I have been inspirited by the generosity of ordinary South Africans who have stepped up to care for those experiencing poverty and homelessness. As many other professions, we auditors will have to change the way we work. Let us hope the generosity we’ve seen remains as we evolve with new lessons in mind.
• Stewart is CEO of BDO SA.