COVID-19 Focus – How The Accounting Industry Has Been Impacted By The Pandemic
Nearly every industry has been challenged by the COVID-19 pandemic in some way, whether it’s a suffering business struggling to stay afloat or a company that’s struggling to meet a booming demand. By interviewing experts in their respective fields, Higher Rock Education examines the short-term and long-term impacts of the COVID-19 pandemic in a wide range of industries.
Alex Harris has worked in audits at Cherry Bekaert for the past seven and a half years. He is an audit manager with the company, which is among the largest accounting firms in the Southeast United States. In the interview below, Harris discusses what impacts he’s seen in accounting during COVID-19, how businesses have been impacted and potential permanent changes to accounting in a post-COVID-19 world.
Higher Rock: Describe the work of an auditor for Cherry Bekaert?
Alex Harris: “We work with a wide range of companies, including not-for-profits, companies that are both public and private. We work in the middle market. We do any kind of audit and assurance work.
“Companies that have to get an audit, let’s say, it’s a bank requirement where the company has a lot of debt with the bank. The bank requires an audit, then we’ll audit. Maybe the bank requires a financial statement review, which is a little less in scope than a full audit, but it's assurance related, we’ll help with that. We also work with and conduct audits for not-for-profits.”
HR: What general impacts has COVID-19 made on your work as an auditor?
AH: “There are a couple of ways to look at that. In terms of how people did their work, we transitioned fully to remote work. Even more than a year later, I haven’t been back to a client’s site. I do have some colleagues that have gone back for a day or part of a day, for a meeting that had to be in-person, but everything was switched to pretty much fully remotely.
“From an audit perspective, we were prepared for that transition maybe a little easier than other industries. We already were used to working at client sites quite a bit, so we were out in the field and having to remote in. In some ways, that transition was a bit easier than other companies or even other divisions within our own company.
“We went from using Microsoft Teams for instant messaging to using it for every single meeting. That was a big change. Our office has re-opened but on a limited capacity basis.
“From a business perspective, there was a lot of concern at the beginning about how any micro or macroeconomic factor that might impact our clients could impact us. If a client goes out of business, then there isn’t a need for an audit. That was a big concern at first. Another impact was work that was delayed, like tax work after the government delayed the tax deadline. That work was pushed into the summer. From a cash-flow perspective, there was a lot of managing that had to be done, because the timing of our revenues switched.”
HR: How do you consider the impact of COVID-19 on a client’s business when conducting an audit?
AH: “As an auditor, there is certainly a heightened awareness and risk with companies being a going concern. Are they going to be around in one year from the day of our audit opinion? Liability has become an increased focus of our audits. We look at cash-flow projections. We talk with management to see what their plans are for the upcoming year. If companies received PPP [Paycheck Protection Program] money, we look to see if they accounted for that correctly since guidance has come out on how that’s supposed to be accounted for.
“Anytime you have a downturn in the economy, you have increased pressures and incentives for management to manipulate their numbers. Depending on the company and industry, we have procedures to look for unusual transactions. Professional skepticism. A big piece of an audit is the analytics of comparing current year results with prior-year results.”
HR: In pre-COVID times, how much did you travel for work to perform physical inventories?
AH: “I’ve been at the firm for a little over seven-and-a-half years. When I first started in fall 2013, I probably spent six weeks traveling out of the year. We did some regional travel. In the last few years before COVID, travel dwindled to only a week or two per year. Part of that has to do with the firm wanting us to cut down on travel and work more from the office, from an office culture perspective.
HR: Do you work from home?
AH: “I’ve been working from home almost exclusively. I went into the office some back in October. We have a fall busy season, along with a spring busy season. It was nice to go in and be near the commercial printers and scanners. It’s nice to have a little bit of separation between work and home life. I haven’t been to the office since the holidays.”
HR: What were some of the biggest challenges that you’ve faced in working in a remote setting?
AH: “It’s definitely an adjustment. I have a long commute, so it’s nice to cut down on the commute time to and from the office. The other side of that is filling that time with more work. One of the challenges that I’ve found is separating work life from home life. The laptop is always there and open when needed, so it’s important to be disciplined about setting some boundaries.
“It’s also been a challenge for our new hires to adjust to the culture and from a training aspect too.”
HR: In the future, would you prefer working from home or going back to the office or a hybrid?
AH: “I think a mixture of both is ideal for me. I can see a scenario where I’m happy to continue working from home several days a week and working in the office a couple of days a week. That would be a nice mixture of meeting people and having the work culture, but not having to commute every day for me, personally, would be great.”
HR: Did Cherry Bekaert furlough any employees?
AH: “There were a small number of cuts within the first few months. They tried to ride the wave out, but they did end up making some cuts.”
HR: Was your work impacted by the shutdown of much of the economy and its recent recovery?
AH: “The biggest impact at first was the uncertainty of what was going to happen. Especially for our tax, evaluation, and transaction groups. Nobody was sure what was going on, so a lot of their work was stopped or delayed. That was an immediate impact. We delayed some audits. We had several clients who were trying to run their businesses and transition to a remote work life. They didn’t have the capacity to handle going through an audit, so they might’ve worked with their bank or shareholders, whoever was triggering the audit, to delay the audit.
“The firm did really well with the PPP loans, which became a big point of focus. There was a lot of consulting revenue and work that was picked up to offset the other lost revenue.”
HR: Do you know when your accounting firm plans to begin in-person inventories again?
AH: “I think eventually we will go back. There were some before the pandemic that could be done remotely. As long as we’re comfortable that our clients have the proper protocols in place, I think we’ll return for some on-site work for inventory.”
HR: How do you believe COVID-19 will impact the accounting industry moving forward, both in the short term and long term?
AH: “I think a lot of companies will move to a hybrid of in-office versus a remote work environment. Companies have innovated some in the past but have really been forced to because of COVID. They’ve figured out that work does still get completed at home. So, I think a lot of firms, both larger and smaller than Cherry Bekaert, will adopt a hybrid work model for their employees.
“Otherwise, it will be interesting to see with the economy recovering, the markets that we operate in – middle markets largely in the Southeast there is a lot of merger and acquisition activity – I’m interested to see how long that takes to fully recover.
“The firm is putting a lot of resources into artificial intelligence for the work that we do and to help clients. That’s on the horizon for a lot of industries, not just public accounting. It’s coming and it’s coming soon. Our firm is already making a large investment in it and I’m interested in seeing how it alters what we do.”