Why I have confidence auditors are ready to meet this time of economic uncertainty from coronavirus
COVID-19 has created the largest health and economic crisis in decades. Health care workers, scientists and first responders are doing brave work to ensure we have access to care, medicine, food and critical supplies. Their skills and sacrifices will save lives and help restore our health, and we thank them.
As Securities and Exchange Commission Chairman Jay Clayton recently recognized, the continuing operation of the U.S. capital markets is also an essential component of our national response to, and recovery from, COVID-19. The public company auditing profession plays a key role as an independent gatekeeper in the financial reporting ecosystem that underpins confidence in capital markets, and ultimately, in the resilience of the American economy to bounce back after the immediate health threat recedes. After all, investors and other stakeholders depend on consistent, reliable and comparable information — audited information — that they can trust when making critical decisions that shape the health and stability of the markets. That’s especially true during times of market volatility.
It is without question that the current situation creates many new uncertainties and challenges for public companies and their auditors, and these issues are changing on a daily basis. Notwithstanding this, I have confidence auditors are ready to face these challenges for three primary reasons.
First, audit firms have quickly adapted to the new normal of remote work while remaining laser-focused on audit quality. The evolution of the audit profession in recent years brought about new ways of working, including remote-work tools and virtual meetings. Further, in response to the complexities of working with global corporations, the profession and its high-performing, multidisciplinary workforce have helped lead the way in the adoption of new technologies and innovative approaches to coordinating with clients and collaborating with one another remotely.
Of course, the pandemic has brought added complexity by requiring remote work not just by the auditors, but by their public company clients and employees. Audit firms have quickly reinforced, tailored or instituted new audit quality policies and procedures and additional layers of review in response to this new normal, as well as guidance to their teams regarding potential heightened areas of risk and concern. The objective behind all of these actions: audit quality must not yield.
Second, public company auditors serve as a key link in the financial reporting and communication ecosystem. Even in “normal” times, public company auditors are in regular communication with their regulators (both the Securities and Exchange Commission and the Public Company Accounting Oversight Board), boards, audit committees and company management. As public companies close their books on this most recent quarter (or year), this communication has significantly increased as auditors confront the existing and emerging issues and uncertainties arising from COVID-19. With experience in virtually every industry and sector in our economy, public company auditors coordinate with all of the key stakeholders in the reporting ecosystem to raise and seek to address these issues.
Third, audit firms are prioritizing people and their communities. From the earliest days of the COVID-19 pandemic, audit firms put their employees’ well-being first. They quickly curtailed travel to protect the health of their auditors and took steps to shield jobs from the economic impact. In a recent op-ed by Tim Ryan, the PricewaterhouseCoopers U.S. chair and senior partner said the firm will only consider laying off employees as a last resort.
Firms are also stepping up philanthropic efforts to help people affected by the crisis. KPMG, for instance, recently announced it’s partnering with UNESCO on a COVID-19 global education coalition to help ensure learning and education for young people during this difficult time.
No one can predict the future, including when we will emerge from this global pandemic or the extent of the economic consequences. To be sure, when it comes to COVID-19, all parties — regulators, public companies, management, audit committees and public company auditors — are dealing with uncertainties and challenges. However, I’m confident auditors will rise to the challenge, bound by a collective purpose to serve the public interest and preserve trust in corporate reporting for the stability of our capital markets and economy.