The coronavirus outbreak (COVID-19) has significantly impacted several business across the world due to business shutdowns and obstructed the smooth functioning of business operations by interruptions of production, supply chain disruption, reduction in sales and profitability, unavailability of personnel, etc. Auditors are of the view that companies may have to reflect the impact of COVID-19 in their financial statements.
Auditors are awaiting guidelines from the Institute of Chartered Accounts of India (ICAI) and other regulatory authorities, otherwise they will have to take a call if a company’s loss or dip in profits is due to the COVID-19 outbreak.
Some of the issues companies could face during the COVID-19 outbreak include:
Following items to be considered by Companies to evaluate the impact of COVID-19 on financial reporting:
- Disclosure requirements regarding business risks related to the impacts of COVID-19 as recommended by the regulatory authorities
- Companies should consider whether economic uncertainties and market volatility have or will affect accounting conclusions and evaluate effects of adjusting events, if any.
- Effects on Internal Control over Financial reporting as new IT Controls have been built up. For example remote work access to employees, maintenance of confidentiality of information, etc.
- Companies with significant overseas operations may encounter delays in receiving financial data for Consolidated Financial results.
Current reporting period is January-March 2020 for most companies in India, they may have to declare the impact of COVID-19 disruption in its financials.
Further, audit firms say that if there is a significant impact on a company’s economic activities and financial statements due to COVID-19, then an assessment must be conducted to check if the entity can continue as a going concern.
Experts say that since there is no understanding of how long the pandemic and its resultant impact on businesses will last. Therefore, auditors will have to exercise their judgment while working on financial statements and audits during this time.
Disclaimer:
The information contained herein is in summary form and is based on information available in public domain. While the information is believed to be accurate to the best of our knowledge, we do not make any representations or warranties, express or implied, as to the accuracy or completeness of such information. This document is not an offer, invitation, advice or solicitation of any kind. We accept no responsibility for any errors it may contain or for any loss, howsoever caused or sustained, by the person who relies on it.