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FRC issues COVID-19 guidance

30 March 2020: the Financial Reporting Council has published guidance for companies preparing financial statements and a bulletin for auditors covering factors to be taken into account when carrying out audits during the current COVID-19 crisis.

This new information includes guidance on the ethical implications for auditors providing support to audited entities at this time, in particular in accessing government support schemes.

The guidance for companies highlights the need to agree on new working practices if the usual forms of management and control are disrupted and reminds boards of the detailed consideration they need to give to capital maintenance. It addresses the difficulties companies currently face in making forward-looking judgments in their financial statements: for example, in strategic reports and viability statements, with a focus on appropriate disclosure of material uncertainties and going concern issues.

The bulletin reminds auditors that they must obtain sufficient, appropriate audit evidence to support their audit opinion. However, in the current circumstances, they will need to consider the use of alternative procedures, including remote working and technology to obtain that evidence. This will not work in all circumstances and it is likely that there will be more modified opinions arising from the impact of COVID-19 on businesses.

The bulletin for auditors can be found here and also includes guidance on the ethical implications for auditors providing support to audited entities at this time, in particular in accessing government support schemes. The section on ethical implications reads:

Support to audited entities

Auditors are reminded that the Ethical Standard permits the provision of a non-audit service to support a public interest entity in addressing a time critical and price sensitive issue, where that service would not undermine the auditor’s independence from the perspective of an objective, reasonable and informed third party. This should be taken to include supporting companies in making applications to any of the business support schemes announced by government in response to COVID-19.

For the latest news and guidance on the ongoing impact of COVID-19 for businesses and accountants, visit ICAEW’s dedicated Coronavirus Hub.

You can also find specific guidance for preparers of financial statements on the coronavirus outbreak here.