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By John P. Mulcahy, CPA

Auditors in public practices and in-house have had to find ways over the past year to complete our work under unusual circumstances, often without leaving home. We accomplished more than expected, despite limitations on travel and restrictions on seeing clients in person. Because our effectiveness in providing assurance has been better than expected, the savings have not gone unnoticed. Even though we may be tempted to embrace remote auditing, we shouldn’t.

Remote auditing, like a video call with a loved one, is a poor substitute for the real thing. Believe it or not, auditing is about being there. Yes, we don’t have to be on site to analyze data, review documents, and have conference calls, but since when is that an audit?   

Much of the value of an audit is in the personal interactions with those on site and the time spent walking the plant floor, talking with the people in the warehouse, and inhabiting the spaces that our clients live in for a few days or weeks. There’s no substitute for the chance encounter in the hallway with a trusted colleague who pulls you aside for a confidential talk so he can share what you really need to know.

We learn more from the world around us, especially the people, than from the reports and video conferencing we’ve learned to embrace. CPAs call our work “engagements” because it is about engaging with people to discuss and understand the work they do.

In a similar way, no one should buy a home based on pictures, floorplans, and walkthrough videos, no matter how professionally produced. You and your family need to walk through it yourselves. It’s the only way to get a true feel for the place. You also look around the neighborhood, have lunch at a local restaurant, and drive past nearby churches, parks, and the elementary school. After that you really know something, maybe enough to confidently decide. This is a kind of “audit” everyone can relate to, and it’s all about being there. Otherwise, you don’t really know the place well enough to make valid judgments.

What we’ve been doing over the past year, though unavoidable, is not what we should accept as best practice once pandemic restrictions lift.

Most auditor understand that not being on site means that the audit team may miss something important: a key risk or issue can slip through the cracks as the team meets objectives through emails, video meetings, remote data analysis, and other detached steps. But there’s another, potentially more troubling downside to remote auditing:  overreacting to issues that are found.

In a remote environment, information that appears to be significant can take on a life of its own. On site with the client, quick discussions can clarify things before they snowball. Sure, this can be done by phone, but that’s less than ideal when the stakes are high. It’s better to take a walk to someone’s office for a 10-minute heart-to-heart conversation. Often, you can resolve the issue before lunch; then, you go to lunch, keeping your relationship on track.

The lesson here is that, with remote audits, not only can real issues be missed, but also false alarms can keep on ringing. It’s what happens when smart people are hunkered down in basements, isolated, making assumptions, and imagining things. With no on-the-ground contact with the world outside of our heads, reality gets distorted and no longer reflects what’s relevant and important.

True, there have been benefits to our audit approach this year, particularly our better use of technology and the cost savings. But let’s not fool ourselves. We need to get back in the game. It’s time for auditors to be present and accounted for.

John P. Mulcahy, CPA, is internal audit director for FMC Corporation in Philadelphia. He can be reached at john.mulcahy@fmc.com.

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