AUD339 GROUP REPORT

ARTICLE REVIEW

TITLE: The impact of Covid-19 on Audit and Assurance –

LECTURER’S NAME : MADAM SHARIFAH BINTI IDRIS

PREPARED BY :

NAMA NO. MATRIKS CLASS/GROUP

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 ACKNOWLEDGEMENT

First and foremost, praises and thanks to Allah, the Greatest Almighty. we were able to
complete this Final Year Thesis by His Will and blessing.

We would like to acknowledge with mush gratitude and appreciation to all those who believe
in us by giving the opportunity to complete this report. Special thanks to my respectful Madam
Sharifah Binti Idris for all the guidance and encouragement which helped us in deciding and selecting
the article for us to succeed in this written article review report. A sincere thanks for the time spent
on guiding and correcting our mistakes in order for us to improve in such better way.

A part from that, I would also want to express my gratitude to our fellow classmates for
directly and indirectly gave and contributed some information and knowledge in making this report
successful.

Last but not least, special thanks to who directly or indirectly have lent their helping on my
way of finishing this article review written report. Thank you for all the support and concern.

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TABLE OF CONTENT

1.0 INTRODUCTION ................................................................................................................................. 1

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1.0 INTRODUCTION

The article that we chose to review is ‘The impact of Covid-19 on Audit and Assurance –
challenges and considerations’. The main discussion of this article is how have Covid-19 pandemic has
affected auditing and assurance while also discussing on the new challenges that be considered during
Covid-19 pandemic.

According to the author, as Covid-19 pandemic started to spread around the world has
affected most of the profession hanging as well as accounting and auditing. The author has identified
the assessment risks of ‘Material Misstatement’ through business and its environment. Included in
the article, Material Misstatement caused either due to fraud or error, at the financial statement and
assertions level. Changes of normal life’s routine between before and after pandemic were the main
cause for auditors in order auditors can no more travelled to premise to do audit as well as the
mandatory lockdown from authority to avoid the virus spreads which also lead to auditing procedure
need to be revised and modify. The author also determined the risks of modify the procedure as well
as bring some opinions on independent auditor’s report in order to let auditors gain sufficient
appropriate audit information which uncertainty caused by Covid-19.

Based on the challenges to auditors in order to continue their auditing, authors also
demonstrated both good and bad impacts on auditor’s responsibilities in continuing audit procedure.
Therefore, this study argues risk assessment, changes, modification, challenges and opinion in auditing
between before and after Covid-19 pandemic spreading around the world.

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2.0 EXPLANATION AND ARGUMENTS

This article stated Mandatory lockdown measures were imposed by governments to control
the spread of the virus, with individuals having to work from home where possible. This causes to
auditors no longer can travel to audited entity or premises and even their offices which resulted to
audit need to be done remotely. This study’s theory helpful to show that how big challenges are for
audit need to be done remotely and it is never be done before. The attribution facts were taken
from survey conducted by ACCA during the pandemic where shows that a significant 53% of
respondents working in public practice said they were experiencing pressures completing client
services work, and over a third (36%) said they faced an inability to meet reporting deadlines - a
point recognised in many jurisdictions where reporting deadlines have been flexed. A quarter said
they’re experiencing difficulties in gathering audit evidence, and 27% said they saw an increased
audit risk relating to valuation of assets, completeness of liabilities or going concern issues. The goal
of this study is to look on the impact and modification of auditing after Covid-19 pandemic. The
ability and the risk assessment that can be determined by auditor. However, it may be change during
the course of audit depend on the additional audit evidences obtained.

According to paragraph 31 of ISA 315 (Revised) states that in circumstances where the
auditor obtains audit evidence from performing further audit procedures, or if new information is
obtained, either of which is inconsistent with the audit evidence on which the auditor originally
based the assessment, the auditor shall revise the assessment and modify the further planned audit
procedures accordingly. Therefore, there is no certainty on how the risk assessment material applied
during auditing. The unprecedented state of emergency caused by Covid-19 has impacted the
operating environment of entities. As a result, auditors must consider how this impacts their risk.
UK’s Financial Reporting Council (FRC) noted that audits that underway relating to period of 31
December 2019 need to revise their risk assessment and the proposed response to their risk which
caused by Covid-19. Next, The Covid-19 outbreak was treated as a non-adjusting post balance sheet
event by most entities with December 2019 year-ends. ACCA’s article on the impact of Covid-19 on
corporate reporting states there is more doubt about whether for January or February reporting
dates the consequences of the COVID19 are adjusting or non-adjusting events.

Thus, auditing procedures might change due to Covid-19 influenced the challenges of
auditing that need to be done remotely. Auditors have to apply proper method in order to collect
sufficient information and proof so that auditing to be done successfully as well as true and fair.

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3.0 ANALYSIS AND EVALUATION

Based on the studies that have be done, the authors have discussed and analysed as well as
prepared explanation of the study. Extracted from the article, the author highlighted facts, procedures
and standards that been taken from ACCA, ISA, IAASB and many more institutions as well as standards
of accounting and auditing. Despite its contribution, this study have has several limitations and
weaknesses regarding the facts and opinions that carried out by authors where during deciding the
auditing results, challenges that come from Covid-19 pandemic such as inability to collect or gain
sufficient information and supporting evidence, the auditors need to do modification opinion among
them depending on the materiality and pervasiveness of the documents as a whole. Thus, auditors
will hold the responsible of decisions making and need to decide on how and which modifications in
their opinion is more appropriate in order to avoid any kind of fraud and keep the ‘neutral’
characteristics in the audited firm.

Secondly, written in Paragraph 18 of ISA 570 (revised) that based on the audit evidence
obtained, the auditor should conclude whether, in the auditor’s judgment, a material uncertainty
exists related to events or conditions that, individually or collectively, may cast significant doubt on
the entity’s ability to continue as a going concern. As we see from the article, material uncertainty will
occurs when the magnitude of its potential impact and like of occurrence can be doubted on bring
high concern to the firm. As for that, appropriate disclosure of the nature and implications of the
uncertainty is necessary, such as for cases which fair presentation financial reporting framework, fair
presentation of the financial statements or the financial statements must not have any misleading
characteristics for compliance framework cases.

Experienced auditors' criteria involve scepticism, professional judgment, and the acquisition
of knowledge about the risk of fraud in performing the audit. Auditors with less experience have
difficulty in adaptation and changes of procedure as well modification of opinions that need to be
applied compared to higher experience auditors. This study uses standards that has been made by
ACCA, IRB as well as auditing and accounting associations to test the hypothesis and identify factors
on auditors’ standards and procedures so that the opinion and going concern material are still parallel
as before pandemic auditing processes. However, the regression is performed to test the hypothesis
to determine how much influence the independent and control variables influence the dependent
variable.

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 As a result, according to this research, audit procedure and auditor experience are relative
criteria that may be used to explain auditors' sense of responsibility for going concern and
modification of opinions which related to the impacts of Covid-19 and over the challenges that the
pandemic has caused. Audit modification of opinions might alter auditors' level of responsibility in
preparing fair and neutral auditing decisions for any firms either remotely or physically, such that,
procedures and standards need to be followed and applied too so that the results are always parallel
and same among auditors and firms. Auditors on other hand need to always thought of way to keep
collecting sufficient information and evidence remotely without doing any physical contact due to
challenges from Covid-19 impacts.

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4.0 CONCLUSION AND RECOMMENDATION

The relationship between auditing processes, procedures and standards to the impacts of
Covid-19 as well as the challenges and assurance that need to overcome are summarized and
explored. Concluded here that experiences auditor will come up with various and creative way of
modification opinions in order to overcome the challenges of the mandatory of lockdown while
needed to complete the auditing remotely. The objective of this study is to determine how Covid-19
has affected the auditing profession and to observe the challenges of auditing during the pandemic.
The finding suggested that the factors can be explained by the various changes on normal routine as
well as disability of auditors to continue the audit physically. While implementing the comprehensive
internalization process, audit firm should establish good procedures and develop policies in order to
overcome the challenges and hurdles due to the impacts of Covid-19 while exploring modification
opinions to ensure the auditing can be done smoothly even by online systems. This step should help
improve the auditor's awareness of this process. Auditor hold a big role in business world, such as
detecting fraud, recognize errors and prepare guidelines to accountant. It is crucial profession that
need to keep continue even while pandemic season. Also, the modification opinions and going
concern from this study were extracted and based to ACCA’s and ISA standard and policies which is
relevant and could be consider as relevance subject to be applied during the pandemic. Last but not
least, the hypothesis of this study which the relationship between auditing processes and the
challenges to overcome during Covid-19 pandemic concluded with audit firms need to do modification
opinions suitable to the cases in order to access sufficient information and collect evidence in various
way to ensure auditing process going smoothly without breaching any policies and guidelines.