COVID-19 EXPERT LEGAL INSIGHTS

COVID-19 economic chaos – how can audit deadlines still be met?

23 March 2020

We are living in unprecedented times.  Boris Johnson’s announcements each day, whilst aimed at slowing the growth of the global pandemic which is COVID-19 (Coronavirus), will undoubtedly have a drastic effect on businesses in all sectors.


The world must go on, but how? Vast swathes of the work force (those who can) are working from home. Technology is stepping in to assist with the change in working patterns, but it is not infallible.  There is huge pressure on parents, often trying to do two full time jobs whilst looking after small children.  With schools closed, there is also the pressure to home-educate children, whilst trying to insulate them from the stress and fear that many adults are experiencing.

Audit firms carrying out statutory audits, with strict timescales, are one of the types of businesses which will feel the effects of this pandemic quite strongly. There are huge restrictions on travel, with the inevitable consequence that client sites are simply inaccessible. There is also the human factor of a workforce which may be reduced in productivity, on both the client’s and auditor’s side, due to the factors I have described. This is on the background of many firms facing an uncertain future, due to the decline in demand and the changing market conditions. In such circumstances, audits become even more important.  

The Financial Reporting Council (FRC) acknowledged in a press release on 16 March 2020 that auditors will find the situation extremely challenging.  However, it indicated that, “the current situation should not undermine the delivery of high-quality audits…”and that, “Audits should continue to comply fully with required standards.”  It explained that additional time should be taken, when required, even if that comes with the risk of delaying company reporting.   It set out a number of factors which should be focussed upon, given the likely impact of COVID-19, including:

  • the auditor’s risk assessment, and whether any revision to it is necessary;
  • how the auditor gathers sufficient audit evidence;
  • how group auditors’ work can be assessed against standards, especially when travel is restricted;
  • the assessment of going concern, given the likely downturn in the economy;
  • the adequacy of disclosures made by management on the impact on the company of COVID-19; and
  • the need for the auditor to assess the dynamic nature of the COVID-19 situation, and how evidence of a change in circumstances may be required up until the point of signing the auditor’s report. 

Questions were then raised as to how companies could meet strict filing deadlines. On 19 March 2020, Companies House advised that a company could apply for an extension to its filing deadline if COVID-19 had adversely affected its ability to file its accounts in time.  An extension must be applied for before the filing deadline, and should be accompanied by any documents which would support the application.

In the event that an audit simply cannot be completed on time, due to human elements, travel or technology, the Government has at least relaxed its rules to ensure that auditors can make alternative arrangements to ensure that its audits are carried out appropriately, professional scepticism is applied and company accounts are accurate and complete.

From the perspective of audited companies, the pressure on their finance functions in the coming weeks and months will be significant. The focus may naturally shift onto the frequent provision of financial information and forecasts, as companies face new pressures every day.  Whilst there is a degree of latitude for companies and auditors in finalising and submitting accounts, the message from the FRC is clear:  although there are huge other pressures, don’t forget your statutory responsibilities.

About the author

Julie Matheson is a Partner in the Regulatory team, specialising in defending professionals in the financial and legal fields.  She has particular expertise in defending accountants and accountancy firms in regulatory proceedings brought by the FRC, ICAEW and ACCA.  She also regularly provides advice on FCA conduct issues, particularly under the Senior Managers and Certification Schemes.

 

 

COVID-19 related insights:

COVID-19 related insights:

Our COVID-19 statement

We recognise that these unique times are presenting unprecedented challenges for our clients and we are here to support you in any way we can.

Click to view

Can you get out of or suspend a contract because of Coronavirus?

Alex Torpey covers the key things to look out for if you are relying on the Force Majeure clause.

Watch the video on LinkedIn

Overcoming the challenges of co-parenting for separated and divorced parents

Rachel Freeman, Partner in our Family Law team, addresses some issues that we are seeing arise for separated parents in the current crisis.

Read the blog

Tech in Two Minutes - Episode 7 - The Coronavirus challenge for tech coworking spaces

Andrew Solomon speaks about the challenge for tech companies and coworking spaces during the current COVID-19 pandemic.

Listen to the podcast

Property done Properly - Episode 1 - COVID-19: Tips for documenting a Rent Concession

Rent Concessions are on the rise during the outbreak of COVID-19. In the first Property done Properly podcast, David Newnham discusses six of the practical considerations when documenting Rent Concessions

Listen to the podcast

The legal basis for lockdown

Alun Milford, Partner in our Criminal Litigation team, provides an in-depth look at the legal basis behind the current lockdown.

Read the blog

Managing your Migrant workforce in the COVID-19 crisis

On Friday 3 April, immigration partner and head of department, Nick Rollason, hosted a webinar looking at urgent issues employers are facing during the COVID-19 crisis and answered some of the key questions being raised.

Watch the webinar recording

Furlough leave and the Coronavirus Job Retention Scheme: key legal considerations for Employers

On Thursday 9 April, Andreas White, Partner in our Employment Law Team, delivered an overview of the scheme with a focus of the key legal issues for UK employers.

Watch the webinar recording

Coronavirus and the perils of signing your Will

Will instructions have apparently risen by 30% since COVID-19 reached our shores. What effect does COVID-19 have on Will signings? James Ward and Diva Shah in our Private Client team blog.

Read the blog

The juggling act of a single mother, home school teacher and head of a family team

Charlotte Bradley, Head of our Family Law Team, reflects on how the COVID-19 crisis has affected working parents like her.

Read the blog

The future public inquiry into COVID-19

Calls for a public inquiry are continuing to mount and are likely to prove difficult to resist. In this blog, Sophie Kemp considers the framework for such inquiries, and the key issues likely to form the core of its terms of reference.

Read the blog

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Let us take it from here.

+44 (0)20 7814 1200

enquiries@kingsleynapley.co.uk

Skip to content Home About Us Insights Services Contact Accessibility