COVID-19: Implications for financial reporting and audits

The unprecedented events caused by the COVID-19 pandemic mean that the context in which companies are planning and reporting is changing rapidly.

Directors must proactively consider the practicalities of how they will continue to comply with their reporting and disclosure obligations in this climate.

Entities with December 2019 and early 2020 year-ends must consider COVID-19’s effects on their activities and how these are reflected in their financial statements.

How can you ensure your financial reporting and audit processes are as robust as possible?

1. Consider disclosure obligations regarding business risks related to the impacts of COVID-19 within the context of local regulatory requirements. How is the entity affected by, and responding to, these risks? Disclosures should be specific to individual circumstances.
2. Consider whether economic uncertainties and market volatility will affect accounting judgements. Do events occurring after the reporting period, but before the financial statements for that period have been issued, require disclosure or recognition? What disclosures are required to support the Going Concern basis of accounting? Is there an impact on estimates and valuations recorded?
3. Consider the effect on internal control over financial reporting due to the local impact of COVID-19. How are internal controls operating in the new climate, especially with the extent of remote working? And, for those companies with significant global operations, what assurance do you have over controls operated throughout the entity/group?
4. Consider, and plan for, whether you will encounter delayed reporting, filings and communications. What have local regulators done to ease the burden on companies, for example, have there been any extensions to reporting deadlines?
5. Consider how you can work effectively with your auditors to ensure a high quality audit can be conducted despite the likelihood of remote working. How will you be able to provide the audit evidence required? How will you liaise with the auditors and discuss the findings and conclusions of the audit?

If you wish to discuss the implications for financial reporting and audits, please contact your usual Baker Tilly network member or email audit.assurance@bakertilly.global.

DISCLAIMER: All opinions, conclusions, or recommendations in this article are reasonably held by Baker Tilly at the time of compilation but are subject to change without notice to you. Whilst every effort has been made to ensure the accuracy of the contents in this article, the information in this article is not designed to address any particular circumstance, individual or entity. Users should not act upon it without seeking professional advice relevant to the particular situation. We will not accept liability for any loss or damage suffered by any person directly or indirectly through reliance upon the information contained in this article.