What are the key audit considerations during the COVID-19 crisis?

The last few weeks have been testing times for businesses across the UK. The disruption caused by the coronavirus crisis has created particular challenges for businesses in regard to their auditing and reporting obligations.

As a firm, we’re adapting our audit approach to ensure that clients can get the support they need. In many cases, this means we’re carrying out audits remotely, working flexibly to suit the needs of businesses who may have reduced finance teams, and using technology to keep things flowing.

Below, we’ve summarised some of the key considerations to keep in mind when preparing for an audit during the covid-19 crisis.

Going concern

If your audit sign off falls during the current crisis, your auditor may ask for additional forecasts for at least 12 months from the planned signing date. Ultimately, your auditor must be comfortable with your going concern status, and additional forecasts will enable them to take into account the effects of COVID-19. Additional disclosures in the accounts and audit reports will be common over the coming months.

Fixed assets

If your business hasn’t been able to operate at normal levels and your year end is after December 2019, impairment may have arisen when looking at your tangible and intangible assets. This is something your auditor will be taking into consideration, so why not be one step ahead?

If you have refinanced any of your assets to help ease your cashflow, make sure that you keep all documentation on the value of these assets for your auditor to check.

Stock

If your year-end falls during lockdown, then you might be left wondering what happens to your stock take attendance.

In order for your auditor to gain assurance on this matter, they might be able to complete the work over a video-call, whilst a member of your team (virtually) shows them around the warehouse. However, this depends on circumstances – don’t be surprised if your auditors needs further assurance and has to complete further existence testing at a later date.

Debtors

You should have conversations with your larger clients in particular to make sure that you will be able to receive monies from them in the coming months. It could be a good idea to see how their business is doing. Auditors will be looking closely with recoverability of debtors being a key risk for virtually all audits during this period.

Creditors

Make sure your VAT, PAYE and CIS returns are submitted on time. If you’re choosing to defer your payment, your auditor may need evidence of these agreements, together with your plans to settle them when they fall due, when signing the audit report.

Cash

Your business’s cashflow will also be a key factor that your auditor will look at.

If you have applied for any governmental loans, such as the Coronavirus Business Interruption Loan Scheme (CBILS), or the Bounce Back Loan, you’ll need to ensure that you have kept all documentation ready for the audit. Payments from these loans would be expected to be shown within your forecasts to project a realistic view.

Onerous contracts

Prior to your audit, you may want to consider whether any provisions could apply on contracts that will cost you more to fulfil than company will receive in return. Examples could include factories and restaurants.

Grant income

Your auditor will be checking that you have treated grant income correctly, and that is shown within other income within the profit and loss. Make sure to keep any documentation, proving that you are entitled to this income.  Furlough payments are to be included in the accounts as grant income.

Other requirements

Extra detail should be put into the strategic report or directors report (if reporting under FRS102 Section 1A) as to how you’re currently performing under the circumstances and what your company’s future plans are including how you are dealing with the impact of COVID19.