WHAT TO EXPECT FROM YOUR AUDITOR IN THE TIMES OF PANDEMY

We are surpassing the fourth week of quarantine, or as it is widely called lock down, where our freedom of movement, and even freedom of choice is limited to the legislative restrictions.

Such changes in behaviour and our daily lives must have an effect on everything surrounding us at home, work, public information, and of course, our financial credentials.

As auditors, we invite you to have some insight into our daily routine, and changes that COVID-19 has brought upon us.

In Ukraine, there is a common season for auditors starting from mid-January until April 30^th for public companies and those reporting to the State Committee of Stock Exchange, and June 1^st for large and medium companies, which are bound to publish their audited financial statements on their websites. Therefore, as you may see, right now we are all in the middle of our annual workload.

It is important to note here that Ukrainian legislation allowed changes to deadlines for publication of the financial statements, which means that the reports may be published within three months after the end of quarantine, but not later than December 31, 2020.

In addition, considering our job normally requires working at the Clients’ offices, we are not able to do all the regular procedures required. Hence, such limitations require us to do additional steps in order to comply to the International Standards of Auditing and the relevant reporting standards as a basis of preparation for the financial statements. 

What does that mean to the companies undergoing audits for 2019?

1.    Financial Statements for 2019

There is a statement released by International Federation of Accountants on necessity of relevant disclosures. Companies reporting under International Financial Reporting Standards should make relevant disclosures according IRFS 9, IAS 1 about the going concern, assumptions made and evaluation of risks.

Companies reporting in compliance to Ukrainian national accounting standards and falling into medium category should provide written disclosures in optional format and disclose information on the going concern.

If you do all the necessary disclosures then there will be no surprises or misunderstandings between you and the auditors. Should you omit some of this information, you might be facing a disclosure of such information in the Audit Report on the annual financial statements for 2019.

2.    Audit Reports

How could the auditors disclose this in their report?

There are two ways: if the effect of COVID-19 onto your business is insignificant, then the auditors will describe such effect in their Key matters and their opinion would not be modified. However, should the effect of the events be significant to your business, there could be modification of the opinion.

But we know that all our clients would greatly prefer to have a clear opinion. Our advice – when you receive that draft report from your auditors and summary of identified misstatements, you have a choice to adjust the financial statements and notes to have full disclosures of information that is necessary according to the reporting standards. Adjusting the financial statements would mean resubmitting it to the controlling authorities and publishing it on the company’s website with the Auditors’ clear opinion.

3.    Term of Audit Procedures

Why are the audits for 2019 taking too long?

According to the official notice from the Auditor controlling authority, there is a list of procedures that auditors must consider and include into their planning for all audits of financial statements within the period in quarantine. The guidelines include:

• revisiting estimation of risks;
• evaluate effect of quarantine on the business;
• ongoing concern;
• estimates made by the management;
• disclosures of information in notes to financial statements;
• non financial information review (Management Report);
• analysis of relevant disclosures in non-financial information;
• additional and alternative auditing procedures to ensure that auditors have relevant and sufficient proof to state its opinion

Therefore, we would like you to gain understanding that auditors require to take additional measures to be able to express their opinion. Otherwise, if we didn’t engage in enough procedures we should either express Modified Opinion or a Disclaimer of Opinion for that matter.

Disclaimer of Opinion means thаt auditors could not obtain relevant and sufficient evidence to express opininon on the financial statements.

So it is better to discuss additional procedures with your auditors and understand that such requirements are mandatory and would help your auditors to have a better understanding about your business and its financial standing. 

Good luck with your audits! And, if you have any questions, feel free to ask us at your convenience.