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New Audit Considerations Relating to the Coronavirus (COVID-19) Outbreak

Last updated: Tuesday April 07th 2020

The Coronavirus (COVID-19) outbreak is having a significant worldwide impact. Whilst everyone’s first thoughts are to keep their loved ones safe, auditors have to be alert to the impact that the outbreak is having on their clients.

The global economic downturn, restrictions on travel, delays to supply chains, loss of cash flow, amongst other factors, can all lead to material implications for both the financial statements and the audit report.

In order to assist trustees and our team in responding to the increased risks and challenges posed by the pandemic, we have prepared a new checklist to be used on all audit files where the financial statements have not yet been signed.

The new checklist will impact:

  • Audit Planning
  • Audit Fieldwork
    • Measurement issues (ie valuation of investments)
    • Audit evidence issues (ie what’s the value of the investments now)
  • Completion work
    • Post balance sheet events
    • Going Concern reviews
  • Disclosure in your accounts considerations
  • Audit report considerations

The Coronavirus outbreak came into public knowledge in 2020. As confirmed in ICAEW’s guide “The Financial Reporting Implications of Coronavirus under UK GAAP”, the emergence of the Coronavirus is considered by Assure UK a non-adjusting post balance sheet event for any entity with a year end of 31 December 2019 or earlier.

 

Therefore, assets and liabilities for entities with a balance sheet date of 31 December 2019 or before should NOT be adjusted for any potential impact of the outbreak (unless the impact is so significant that the entity is no longer a going concern).

Entities with a 2020 balance sheet date will carefully need to consider the impact of the outbreak and the timing of the impact on the assets and liabilities. Details of the timing of the outbreak for each affected country can be found on the World Health Organisation website.

Does size matter?

The new audit procedures are relevant for any type of audited entity, irrespective of size.

If you would like to discuss this matter further, please contact your usual client contact.