Delivering for our clients during a global pandemic

From physical to virtual – stocktakes in a global pandemic

In the latter half of FY2020, the COVID-19 pandemic created unprecedented challenges for many Deloitte clients. This unexpected, forced grounding opened up new examinations of how Deloitte can deliver high-quality audit engagements while continuing to serve clients effectively.

At Deloitte, we live our purpose of making an impact that matters by delivering the innovative solutions and insights our clients need to address their most complex business challenges. When COVID-19 hit, businesses faced a challenge like no other. Most businesses experienced a dramatic decrease in activity and had little to no certainty over the severity and duration of the pandemic.

Moreover, the timing of COVID-19 meant that many companies had not completed their corporate reporting for the 2019 financial year end. Companies faced considerable challenges in finalising their financial reporting against a backdrop of prolonged uncertainty and challenge. The financial strength, liquidity and, ultimately, continued existence of companies were called in to question. As a result, significant management estimate and judgement were required in the areas of going concern, bank covenants, impairment and future business plans.

There were also extensive operational difficulties facing companies in performing many essential activities, such as performing stocktakes, performing key control activities and providing appropriate evidence to auditors in a remote working environment.

Working remotely is nothing new at Deloitte; both our technology and culture enable it. But, doing it full-time while creating and maintaining close relationships with our clients and preserving high levels of quality—and also juggling personal and family obligations—has been a demanding feat. Nonetheless, our people have been motivated to use their skills to make an impact that matters for our clients during these challenging times.

One area where we identified innovative ways to support our clients during the pandemic was in the performance of stocktakes. In line with International Standards on Auditing, if stock is “material” to the financial statements, the auditor is required to obtain sufficient appropriate audit evidence regarding the existence and condition of stock by attending physical stocktakes, unless impracticable. In circumstances where attendance at a physical stocktake is impracticable, the auditor is required to perform alternative audit procedures.

Given the government restrictions in place at the time, and the uncertainty on when restriction measures may change, we had to consider several possible scenarios that could arise in the performance of stocktakes. One such scenario included the client stocktake taking place, but Deloitte, as auditors, were unable to physically attend due to travel restrictions or other mitigating factors.

In this scenario, a ‘virtual stocktake’ was performed to ensure we delivered an audit for our clients that met the auditing requirements and gave us, and in turn the company shareholders, the appropriate level of assurance over the existence of the client’s stock. Failure to obtain this assurance may have led to qualified audit opinions. We issued guidance to our clients on the performance of virtual stocktakes, which were performed using web or mobile-based video conferencing technology, and spent significant time discussing the process with management to ensure the virtual stocktake ran as smoothly as possible.

At Deloitte, we strived to identify innovative ways to deliver for our clients during the COVID-19 crisis, while prioritising the health and wellbeing of our people, and virtual stocktakes was one successful approach adopted in response to the challenges brought about by COVID-19.

Eimear McCarthy

National Professional Practice Director

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