Carrying out audits in Ukraine is practically impossible under the current, tragic circumstances. Many businesses are closed, meaning that obtaining sufficient appropriate evidence is impossible. 

In Russia and Belarus, business will be continuing but under sanctions and other restrictions. Accordingly, there will be different impacts on auditing. 

Companies and their auditors may be facing unprecedented practical challenges in a number of areas, including group audits. ISA (UK) 600 includes a requirement for the group auditor to evaluate and review the work of the component auditor.

If this is not possible, then the group auditor is required to undertake other measures and inform the FRC. The requirement in paragraph 42-1(b) of ISA (UK) 600 to inform the FRC is a ‘UK-plus’ to the standard, but other jurisdictions may have similar local requirements.

Many auditors have met this requirement in the past through local site visits to the component auditor team to review key audit working papers and attend closing meetings with local management. 

The UK Foreign Office currently advises against all travel to Ukraine, Belarus, Russia and the Transnistria region of Moldova. Additionally, from 2 March 2022, Poland extended a law limiting access until 30 June 2022 to areas in Poland close to the Belarusian border. With travel restrictions in place, group auditors will need to consider whether alternative procedures still allow them to meet the requirements of ISA (UK) 600.

In meeting the UK requirements, group auditors have many factors to consider. For example:

• Identify impacted audits: Where auditors need to travel overseas for component auditor work, they will need to be aware of local laws and regulations, as well as potential penalties such as fines and/or imprisonment for any breaches.
• Categorise audits: Review the impacted components and determine whether they are immaterial, material but not significant, or material and significant for the group opinion. This will allow the group auditor to better understand the risk associated with each engagement.
• Understand the impact on the component: The group auditor might need to consider whether the group still controls the component, and if not, whether it should continue to be part of the group audit. Where the component is still part of the group audit, consider to what extent the component’s ability to prepare necessary information has been affected. 
• Review the status of work done: Gain an understanding of what work has been performed to date, for example, as part of planning or interim audit work.
• Consider whether the ability to gather evidence has been affected: For example, bank closures, sanctions on services such as SWIFT, or even mass withdrawals of cash, may result in an inability to confirm cash balances. This may have implications for the ability of the group auditor to form an opinion on the group accounts.
• Discuss amending reporting timescales: The situation in Ukraine may mean either a delay in the reporting timetable, or if offices in Ukraine do not reopen for a long period or at all, there simply may be no way to obtain information for the audit in time to meet signing deadlines. With this in mind, a delay in the reporting timetable could allow for time for the situation on the ground in Ukraine and other affected countries to change, and for travel restrictions to be eased or lifted. However, there is no guarantee that conditions will improve. The group auditor will need to understand whether the reporting timetable has been set due to regulatory or other deadlines, such as reporting on covenants. 
• Consider whether the component audit team is still in place: As offices in Ukraine will have closed and staff will not be responding to requests for information from group auditors.
• Review of component team: If there is still access to component auditors, consider alternative activities to demonstrate the review and evaluation of the component team where originally a visit by the group auditor was planned.

Our thoughts are with everyone affected at this challenging time. We encourage all parties to stay up to date with the latest UK Foreign Office advice.

Further reading

The Audit and Assurance Faculty has published a more detailed version of this advice, Guide to the impact of the war in Ukraine on group auditors.

The Audit and Assurance Faculty guide, Remote auditing in practice, originally developed for COVID-19 scenarios, provides further considerations that may be helpful when working remotely. Click here for the full guide for group audits.

The Audit and Assurance Faculty’s article, War in Ukraine: the auditing implications, gives an overview of key areas for auditors to consider in light of the war.

ICAEW’s Financial Reporting Faculty’s article, War in Ukraine: the corporate reporting implications, highlights the financial reporting implications of the war in Ukraine for businesses of all sizes.