The UK Financial Reporting Council (“FRC’) has issued guidance for companies preparing financial statements and a bulletin for auditors covering factors to be taken into account when carrying out audits during the Covid-19 crisis. Much of what the FRC comments upon is relevant to companies and auditors in all countries not just the UK.
The guidance for companies is practical addressing the change in working practice practices arising from disruption to the usual forms of management and control and the challenges relating to disclosures about material uncertainties. Although there are UK specific legal references, comments about capital maintenance will be relevant everywhere. The primary audience for the guidance is listed companies with guidance on the application of corporate governance principles, but the comment about IFRS application includes reference to IAS 1 Presentation of Financial Statements on going concern, significant judgments and estimation uncertainty and IAS 10 Events after the Reporting Period.
The bulletin for auditors observes that auditors need to consider the use of alternative procedures, including remote working and technology to obtain sufficient, appropriate audit evidence. There are observations relating to all stages of the audit. The FRC observes that if management insist on keeping a timetable, but the auditors feel that more time is needed then the auditors should consider whether management is imposing a limitation of scope. This is a good reminder about the importance of dialogue between auditors and management and the audit committee to enable the audit to be properly exercised.