IAASB offers guidance on auditor reporting during coronavirus
The International Auditing and Assurance Standards Board released guidance for auditors to consider when issuing audit reports amid the COVID-19 pandemic.
The staff audit practice alert released Friday covers topics such as modification of the auditor’s opinion due to material misstatement of the financial statements or an inability to obtain sufficient audit evidence. The alert also discusses some of the reporting implications for interim review engagements, along with material uncertainty relating to going concern, plus inclusion of key audit matters and emphasis-of-matter paragraphs.
The IAASB also recently released separate pieces of guidance about going concern audit considerations in the current environment as auditors deal with the coronavirus, and procedures related to subsequent events.
“The uncertainty and challenges caused by the COVID-19 pandemic, including the likelihood of unplanned events occurring at any time, the uncertain duration of this current environment, and potential shifting timelines impact many areas within the audit,” the subsequent events document noted. “At the end of each reporting period, entities will be carefully evaluating information that becomes available after the reporting date but before the issuance of the financial statements. Accordingly, auditors will likely require greater focus on events occurring between the date of the financial statements and the date of the auditor’s report (i.e., subsequent events) and the effect, if any, of such on the entity’s financial statements.”
The going concern guidance points out that the COVID-19 pandemic and deteriorating economic conditions are reducing revenue and cash flow at many entities, and that could raise questions about an entity’s ability to meet its obligations and comply with debt covenants. Auditors need to obtain sufficient, appropriate audit evidence and perform more stringent risk assessment procedures while evaluating management’s own risk assessment.