Question

Assume that the global pandemic COVID-19 will cause a material impact to your audit client. What additional audit procedures and disclosures are required in your audit planning and audit opinion.

Answer 1

If COVID-19 pandemic will cause a material impact to my audit client. First of all, client should comply with relevant national Generally Accepted Accounting Principles (GAAP) and in addition we should report the challenges caused by the pandemic in a sensible and practical way. Going concern - We need to consider the several possible sensitivity analyses to determine whether there is any material uncertainty on its ability to continue as a going concern. If yes, we have to mention the same in our 10-K or respective year end filings. The going concern assessment should be continuously updated to the date the financial statements are approved by us as auditors. We can disclose the impact of pandemic as non-adjusting post balance sheet events assuming most of the clients close their financials on 31 December and pandemic impacted in the middle of January. We will report principal risks and uncertainties in the management report.

In Audit planning we will focus on calculating the material impact of the covid-19 , the impact on our client's going concern and any change in the principal risk. We will review the accounts that are subject to estimation given the uncertainty such as accounting estimates, fair value measurements , assets impairment ,expected credit loss assessments and hedge accounting. The impact of breaches of covenants, onerous contracts provisions and restructuring plans will also be evaluated.

We need to evaluate whether we need to revise the client's risk assessment. We need to gather ufficient appropriate audit evidence and we may need to change the audit approach and develop alternative procedureschange the audit approach and develop alternative procedures. We need to ensure that management’s disclosures appropriately describe the company’s prospects and how financial statements’ users might be affected given the high degree of uncertainty.