Collaborating with External Auditors in a Remote Working Environment

Michael Nyhuis

With COVID-19 still very much present, have you considered the practicalities of sharing relevant information with auditors as you start to gear up for an external audit next January?

In normal years, while you might email some documents over to them, external auditors would probably come to your offices to look at any records containing sensitive data in person. But with ongoing concern about the spread of the virus in enclosed locations and constantly changing rules, that could be difficult in 2021.

While some fieldwork might be possible, it could be challenging to arrange. It all depends on how the pandemic situation and response pans out where your offices and the auditors are based.

According to the Generally Accepted Auditing Standards (GAAS), auditors may use fieldwork to ‘obtain sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to error or fraud.’

Where it’s not possible to arrange site visits, the work that would usually be carried out on site will need to be replicated virtually. Otherwise, the completion of the audit may have to be delayed, putting your company at risk of incurring a penalty for late filing.

In all likelihood, corporate secretaries and paralegals will need to put plans in place to transfer sensitive documents securely to their auditors, so they can do their job 100% remotely. Conventional file sharing technology isn’t going to be secure enough to entrust it with Know Your Customer (KYC) documents, contracts or your company accounts.

Standard file sharing can expose your organization to risks such as hacking attacks, data leaks and emails being addressed incorrectly, putting crucial information into the wrong hands. Fortunately, the Secure File Sharing functionality built into Diligent Entities provides a solution.

How Does Secure File Sharing work?

Secure File Sharing protects your documents with:

  • Role-based permissions
  • Two-factor authentication
  • Strong encryption

The encryption scrambles your data before it’s transmitted, then decrypts it back into its original format ready for only the intended recipients to view. This combination of security measures makes it impossible for anyone else to intercept the data.

You can either send files over to your auditors individually or collate everything together in a secure data room first. Then, when you’re ready, you can simply share a link to the data room with the auditors so they can access the contents.

There is no limit to the size of the files you can share. The strong encryption and secure access controls will ensure that only the right people can access your sensitive data. And the in-built audit trail will show exactly when the files were sent and who accessed them and when – ideal for due diligence.

You may well keep some of the documents the auditors will want to see in Entities anyway. Others, like your company accounts, you could choose to upload from another package ready to share. For maximum security you can set an expiry date to automatically delete the shared files at a specified time.

How Can Diligent Help You Prepare for Fully Remote Auditing?

It’s worth noting that, with many more people currently working from home, auditors may be especially keen to assess your IT control environment. Thanks to our industry-leading security, using Diligent Entities to manage your corporate record will help to stand you in good stead.

With our Secure File Sharing technology, there are no restrictions on the types of file you can share securely. That means, for example, that you can even include videos of inventory counts, replacing the need for auditors to come out for spot checks.

Like many things precipitated by the pandemic, Diligent Entities and Secure File Sharing might end up becoming a part of your new normal, perhaps something that you and your auditors will be glad to stick with.

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Michael Nyhuis
Michael Nyhuis is the former Director of Audit & Compliance at Diligent and a modern governance expert with over 25 years of experience.