The current situation surrounding the SARS coronavirus CoV-2 pandemic presents a significant challenge to audit committees. The board of directors is primarily responsible for developing and implementing an appropriate pandemic contingency plan and linking it to the business continuity plans in place to date. However, the entire board, including the audit committee, should assist management to ensure that all key risks and their impact on the company’s long-term strategy are properly identified.
Monitoring the reporting and examination process even more critical than before.
The main tasks of the audit committee under the Chartered Accountants Act, that is, to monitor the financial reporting and audit process, become even more crucial than before in the current situation caused by the spreading outbreak of SARS coronavirus CoV-2 (COVID-19).
The potential impact of a pandemic on the performance and financial statements of companies can be enormous, depending on the industry, but the focus is on assessing the impact on the entity’s ability to continue as a going concern and ensuring appropriate disclosures in the financial statements. To do this well and efficiently requires close collaboration with the auditor. Active involvement of audit committees in the process of auditing financial statements and guarding its quality in the situation of rapidly changing external conditions and uncertainty is absolutely key,” says Marek Gajdziński, partner, head of the audit department at KPMG in Poland.
Business continuity
Business continuity planning is critical. Organizations may find themselves in a situation where it becomes very difficult or nearly impossible to keep key business processes functioning due to internal or external factors. At such times, organizations should determine what the minimum viability is and what dependencies are required – including people, premises, technology and third-party aspects. A robust crisis management plan makes it easier to make strategic decisions during a crisis like the COVID-19 pandemic.
Implications for 2019 financial statements
Current conditions and circumstances could have a material impact on the financial statements for the year ended December 31, 2019. However, their impact will depend on the circumstances of the company and the extent to which its business is exposed to the effects of the pandemic, as well as the sensitivity of the amounts reported in the financial statements to the volatility of economic conditions.
Particular circumstances bring the assessment of the ability to continue as a going concern and the need to ensure adequate disclosures to the financial statements for 2019 to the fore. Investors expect greater transparency in companies’ reports so that they can make decisions based on full information, says Marek Gajdzinski, partner, head of audit at KPMG in Poland.
The publication entitled. The electronic version of the publication “Priorities of Audit Committees in the face of the COVID-19 pandemic” can be downloaded from kpmg.pl
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