3 March 2020: the spread of coronavirus is disrupting global markets and affecting company operations, supply chains and staffing. This has implications for the work of group auditors. ICAEW has issued guidance to help firms address the challenges, writes Penny Sukhraj.
ICAEW’s Audit and Assurance Faculty has published practical guidance to help auditors meet their obligations under UK audit standards and ensure that their work is as robust as possible despite the challenges presented by the spread of coronavirus.
ISA 600 explains that the group auditor must evaluate and review the work of component auditors. Where this is not possible, the additional requirements found in the UK version of the standard requires the group auditor to undertake other measures – which could include additional work – and to inform the Financial Reporting Council (FRC).
ICAEW has issued guidance to help group auditors take practical steps to navigate the audit challenges presented by coronavirus.
Michelle Cardwell, ICAEW Technical Manager for the Audit and Assurance Faculty, emphasised that the additional requirements of the UK standard are mandatory. Many auditors have met this requirement in the past through visits to the local component audit team. Concerns for staff health, as well as travel restrictions, have meant that a local site visit may not be possible for this year end.
With travel restrictions in place in Italy, for example, data sharing on cloud-based servers and online conversations with component auditors should be among the practical steps that group auditors take. However, when noting the restrictions on data sharing in jurisdictions like China, Cardwell suggests auditors look for practical workarounds.
“Auditors should consider what else they could do to meet the requirements,’ she commented, “but also be prepared to modify their opinion if they are unable to obtain the evidence they require.”
Beyond meeting the requirements of ISA (UK) 600, there are other aspects of the spread of the virus that auditors should consider.
“From an accounting point of view, asset valuations may be impaired and inventories may need to be written off. Auditors may need to consider whether risks to the supply chain or a potential macro-economic downturn could put the going concern status of the business at risk,” Cardwell said.
Auditors also need to be speaking with management to understand the impacts on the companies affected.
“Auditors need to be thinking ahead. While many will be focusing on December year end audits, March 2020 year end audits are on the horizon and it’s important to identify which might be impacted,” she said.
“Get in touch with the FRC if you are concerned about meeting the ISA (UK) 600 requirements. For auditors issuing modified opinions, ICAEW has guides that can help. ICAEW members can also get in touch with ICAEW’s Technical Advisory Service if they need further assistance,” Cardwell added.
This article was first published by ICAEW here.