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COVID – 19 Audit Updates and Implications

MaryPat Davitz

March 20, 2020

Q: Will COVID-19 delay my audit report?

A:  Your audited financial statements could be delayed as a result of extended deadlines and social distancing restrictions recommended or imposed as a result of the COVID-19 pandemic. We recommend that you assess the current status of your audit, related deadlines and if extensions are available. A lot will depend upon how prepared you are for the audit, the extent to which your business is impacted by the restrictions and time you are spending to develop response plans, access to your books and records and related technology that would allow you to complete the audit remotely. Check with your auditor about their remote audit capabilities, communication plans and expected timeline for delivering services.

Q:  How do I know if an extension is available for my audit? / What if I have to postpone my audit?

A:  You may be able to take advantage of an extension to complete and submit audited financial statements depending on who receives your audited financial statements. If you are submitting audited financial statements to a regulatory body, an extension of time to file may be available. Check the resources listed here or directly with regulatory agencies for notification of extended due dates. If you send audited financial statements to a lender or other stakeholders, you should check with them to inquire if an extension of time is possible and request the extension according to your best estimate of expected time to complete the audit. You may also want to check if you have debt covenants related to timely submission of audited financial statements or other financial covenants that may require a waiver and request that at the same time in order to avoid surprises late in the audit process and meet the extended deadline expectations. Check with your auditors about rescheduling fieldwork or remote audit capabilities and establish a revised audit plan.

Q:  Do I have to report information about the impact of COVID-19/Coronavirus in my audited financial statements for 2019?

A:  If you have not yet issued audited financial statements you will need to consider the significance of the impact of the current economic situation resulting from COVID-19 on your financial positions and operations. Although your business operations may not be affected until 2020 and 2019 financial results may not change, you must consider the subsequent period through the date of the auditors’ report and may determine that disclosures related to COVID-19 are relevant and appropriate for readers of the financial statements.

Q:  What can I expect in a remote audit fieldwork situation? / How can I prepare for remote audit fieldwork?

A:  Talk to your auditors about technology resources for sending and receiving information and establish a plan for communicating during audit fieldwork. Make sure you consider security and accessibility of information, as well as timing and deadlines for getting all procedures completed; including questions that arise as a result of audit procedures after information is initially sent to the audit team. Your auditors may already have a portal of cloud software option available for sending data and documents. It is also important to have an understanding about how and when to communicate questions. Consider the locations and capacity of your team and what kind of access you have to records and documents that may be requested by auditors. You should also determine if it is more efficient/effective to respond to emails throughout the day or address questions at specific points during the day via a video conference or call and discuss this with the audit team. It is a good idea to plan for a daily recap of progress and review of open items.

Q:  Can my audit firm help me with COVID-19 preparedness and response plan?

A:  If your audit firm has resources and expertise to assist you with a response plan and preparation for COVID-19, they may be able to perform those services for you if such services do not impair the firm’s independence. Your audit firm should consider if the consulting services related to your COVID-19 preparedness and response plan constitute a threat to independence and whether or not adequate safeguards can be applied to mitigate any such threat to an acceptable level. Your audit firm should not “step into the shoes” of management. Certain services like designing and implementing a disaster recover plan, hosting information systems or data, and making management decisions would impair independence. In short, your audit firm and consult and advise as long as you make all management decisions and retain responsibility and oversight of services.

Q:  How could COVID-19 impact my 2019 financial statement audit?

A:  If you have not completed your 2019 financial statement audit, you should consider the impact of COVID-19 on financial reporting and your ability to complete the audit. Travel restrictions and social distancing or shut downs in other countries where you do business may limit your ability to access or obtain financial information necessary for financial reporting or performance of audit procedures. Additionally, economic uncertainties and market volatility could affect accounting conclusions or require disclosures about event occurring subsequent to year end. Take steps now to understand the potential impact and address changes to your audit plan and financial reporting. Another important consideration is how the current environment may impact internal controls over financial reporting (ICFR).

Q:  Does COVID-19 impact internal controls over financial reporting (ICFR)? / How should I address ICFR related to COVID-19 action plan?

A:  You should consider whether there is any impact on ICFR as a result of COVID-19 impact on your local environment and business operations. Depending on your specific situation, you may need to make changes to internal controls over financial reporting to address remote access or other changes to your financial accounting and reporting environment that are implemented in response to the COVID-19 outbreak.

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