As the COVID 19 pandemic is rolling along with us, it has interrupted the flow of commerce to an extent and has had a significant impact on the economy. As a result of the business interruption, auditors have been obliged to develop new audit methodologies and techniques in order to overcome the problem. While we reach the new wave of the pandemic crisis, economic recovery is going to be tricky, and the long-term impact of the crisis remains unpredictable and impossible to forecast. As a result, most businesses’ financial reporting may be severely impacted by this uncertainty.
- Considerations for Impaired
It is critical to take into account predicted credit losses and future cash flow predictions while doing impairment testing. To establish the effect on damage evaluations, incurred and projected credit losses must be analyzed.
- Recognized revenue
The income to be recorded as COVID-19 may have influenced the revenue recognition pattern and companies may have to account for returns and refunds.
Conferences and events that are cancelled, resulting in the loss of deposits or penalties for contract termination, must be properly recognized, measured, presented, and declared in financial statements.
- Restructuring of Debt
Businesses have been forced to close due to lockdown measures, causing a reduction in cash inflows. As a result, they have sought more funding, as well as revisions to repayment terms and interest rates on existing debt arrangements.
Businesses having business interruption insurance may be entitled to a portion or all of the funds to offset their losses. Furthermore, there have been and will most likely be additional government subsidies and incentives available in the future.
Top Risks Auditors Should Address
Financial Assets Valuation
Credit and Liquidity Risks
Subsequent event disclosures
Delays in Audit Reports
Prevent fraudulent practices
The current unpredictability of the environment can make obtaining sufficient relevant audit proof to support an impartial view more difficult. During the preparation timescale and audit process, auditors should analyze the effect, since there are likely to be concerns that were not previously experienced and must now be addressed.
In reality, the need for outsourced audits will be greater than ever before. When many businesses are struggling to make ends meet, audit firms can resort to outsourcing audit support services to help with people, logistical issues, and to enhance company processes on a constant basis. Audit outsourcing services have become increasingly significant in the present scenario.