Emily Griffith, an assistant professor of accounting and information systems at the Wisconsin School of Business, has received top awards for her work in research and education and is a recognized expert on auditing uncertain valuations. A CPA with professional experience as an auditor, Griffith is also the Cynthia and Jay Ihlenfeld Professor for Inspired Learning in Business.
Griffith talked to WSB about how the COVID-19 virus has changed auditors’ approach to work, the rapid migration to online classes this spring, and what she tells her students about moving forward in the face of unprecedented change. Below are some highlights from that conversation.
WSB: How has COVID-19 changed the way auditors work?
Griffith: My focus is on public accounting, which includes the Big Four accounting firms KPMG, Ernst & Young, PricewaterhouseCoopers, and Deloitte, but there are a number of other firms besides those as well. These firms are all client service businesses. They are really hampered given social distancing, because their job is to go out to client sites and help clients or perform audits.
The routine in the audit field, which is what I know most about, is particularly disrupted because it is similar to an apprentice model of learning, with young, less experienced people working alongside more senior people. It’s a team-based approach, and the audit team is such a fundamental way that people get trained and learn how to do the job.
That’s completely different now because everyone is working remotely via Zoom, so they’re having to totally change the way they do their work. It’s like anything, you establish a rapport with auditors, but no one loves when the auditor comes, right? You work really hard as an auditor to establish positive relationships, make things go smoothly, and help your clients not dread your arrival every year. Now that’s kind of all out the window.
WSB: Tell us about handling regulations and performing analytical procedures during this lockdown time.
Griffith: Given the constraints of COVID-19, there are a lot of remote meetings with clients and it can be difficult to get clients up to speed on providing information and documents electronically that auditors can use as evidence. Auditors always have choices about what evidence they can get. It is rare that the Public Company Accounting Oversight Board (PCAOB), the board that regulates auditors, will require just one type of audit evidence, so auditors can choose a mix of gathering documents from their clients to use as evidence or conducting more data-based analytical procedures, which need less client involvement to do. Given the constraints of virtual work, analytical procedures are probably a lot more attractive right now.
However, there’s a catch: using these procedures is only valid if you have a good way to create an expectation of what you think the numbers should be this year. For example, you can’t rely on prior sales because Q1 of 2020 is crazy and everyone’s sales are really low compared to past history. You can’t rely on how many customers came in to your store because all the stores are closed. If you’re an oil company, you can’t rely on how many cars are on the road because people are working from home and not traveling.
So, the idea of using data is very appealing and works theoretically, but there are some practical challenges because that whole approach depends on finding stable relationships in the data. It might be that audit firms shift to more advanced analytical procedures that work in these more volatile circumstances and that can be taught and performed remotely, but it may take some time and depend on PCAOB requirements.
WSB: What do you see as the long-term industry impacts from COVID-19, if any?
Griffith: My guess is audit firms will be okay because, good times or bad, companies still need to get their annual audits. It’s not a discretionary expense. Many auditing firms also offer consulting or other services, so perhaps some of those other business lines will be impacted. Maybe there will be pressure on auditors to reduce fees for their clients, so that could hurt them. But auditing has traditionally been a pretty stable revenue source. I don’t think audit firms will just completely shut down. Companies can’t just say, “We’re not getting an audit this year.”
WSB: March was really a sea change for all of us on campus, but particularly for students who had applied for jobs and internships, and for faculty who had to migrate courses online so quickly. How did you handle all of these issues coming at you at once?
Griffith: I was honest with the students. I let them know that I’m not this authority figure who knows more than they do about what’s going on right now or what’s going to happen. I try to model—which is still challenging for me—how to deal with that uncertainty and to carry on with what we need to learn.
Accounting firms sent out notifications to our students that all existing job offers were being honored for those that had accepted offers. Thankfully, they didn’t have the concern I experienced as a young auditor during the financial recession in 2008, because that was not what happened at the firms. And when Anderson went under and Enron happened, which was the other big disruption in the accounting industry, that was not the case, either.
During our last six weeks of the semester, the CPA exam was cancelled. [It was since reinstated by Governor Evers on April 9, 2020 as part of Emergency Order #22]. We connected that Monday morning after the weekend it was cancelled and students were understandably asking, “What do we do?” I tried to demonstrate to them that, “It’s okay, we can’t know. It’s crazy and there are just things that we won’t know right now.” I tried to help them see that this early experience of adapting to big, unexpected changes will ultimately help them in the future, as hard as it is in the moment.
WSB: How did students fare in this new “COVID-19” virtual classroom?
Griffith: My students had already completed an internship, so they knew a lot about the practical elements of the job. In class we could just say, “Okay, we’re going to practice this skill, who did this on their internship? What was hard? Let’s try to get better at that.” That helped them stay engaged. I know there will be big challenges going forward, but I was so impressed with my students, with their attitudes and commitments to really trying to make the best of a difficult situation.
I gave assignments in a variety of forms. Sometimes our class meetings would just be the students working in groups on their own; other times, they would submit a written assignment in advance and then we would have a live class together. It really was inspiring to me how hard they kept working, even though there was much less accountability. I can’t say enough good things about how the students performed. I am so proud of our students.
Emily Griffith is the Cynthia and Jay Ihlenfeld Professor for Inspired Learning in Business and an assistant professor in the Department of Accounting and Information Systems at the Wisconsin School of Business.