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FRC issues guidance for auditors arising from the coronavirus pandemic

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17 Mar 2020

The Financial Reporting Council (FRC) has issued updated guidance for auditors which may be facing practical difficulties in carrying out audits as a result of the COVID-19 pandemic (coronavirus).

Uncertainty about the immediate outlook for many companies has increased sharply. This has consequences for companies proposing to report results in the coming months, and for their auditors. 

Some companies and auditors are also facing practical difficulties in preparing accounts and carrying out audits. Given restrictions on travel, meetings and access to company sites in some jurisdictions, the FRC indicates that audit firms may need to consider developing alternative audit procedures to gather sufficient, appropriate audit evidence.

The FRC highlights that the current situation should not undermine the delivery of high-quality audits and indicates that in current circumstances, additional time may be require to complete audits.  The FRC notes that it is important that this additional time is taken even if this results in reporting deadlines being reconsidered or company reporting being delayed.

The updated guidance highlights that auditors will need to consider the impact of coronavirus on: 

  • how they gather sufficient, appropriate audit evidence, recognising that the planned audit approach may need to change and alternative procedures developed;
  • how the group auditor proposes to review the work of component auditors;
  • the auditor's assessment of going concern and the prospects of an audited company;
  • the adequacy of disclosures made by management about the impact of COVID-19 on the company; and
  • the need for the auditor to reassess key aspects of their audit as a result of the fast-changing situation, which may require management to provide further evidence.

The updated guidance also indicates that auditors will need to engage with the entities they audit to ensure they set clear expectations as to the level of disclosure they expect to see in annual reports to communicate the impact and risk of COVID-19 on the company.  It emphasises the importance of communication with companies, especially their audit committee regarding reporting deadlines and support to carry out their work to a high standard. 

The updated guidance follows previous guidance issued by the FRC on disclosure of risks and other reporting consequences arising from the emergence and spread of Coronavirus. 

On 21 April 2020 the FRC also issued guidance on modified auditor's opinions and reports during the COVID-19 crisis which is available on the FRC website here.

A press release and the updated guidance is available on the FRC website. 

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