The Public Company Accounting Oversight Board (PCAOB) recently published a COVID-19 resource, Conversations with Audit Committee Chairs: COVID-19 and the Audit, as a result of its audit committee outreach efforts during its 2020 inspections. Given the unprecedented challenges to auditors, audit committees and issuers due to the COVID-19 pandemic, the PCAOB asked audit committee chairs how COVID-19 has affected financial reporting and the audit.
The resource summarizes common themes the PCAOB heard from audit committee chairs, including:
- Companies contending with new or increased risks associated with the effects of COVID-19 – Audit committees have identified risks related to financial reporting and the audit, including cybersecurity; employee safety and mental health; going concern; accounting estimates; impairments; international operations; and accounting implications of the Coronavirus Aid, Relief, and Economic Security Act.
- Increased risks associated with remote work by the issuer and the auditor
- Most audit committee chairs stated the transition to remote work was effective and that internal control over financial reporting was managed, maintained or adjusted as necessary. The resource includes examples of questions that audit committees have identified as helpful to discuss with their auditors in understanding risks or impact related to remote work, such as:
- Will additional time be needed to get the audit work done remotely?
- Does the audit plan need to be updated?
- Do fees need to be revisited?
- Multiple audit committee chairs identified an increased risk of cyber-related incidents, such as phishing attempts and email security.
- Most audit committee chairs stated the transition to remote work was effective and that internal control over financial reporting was managed, maintained or adjusted as necessary. The resource includes examples of questions that audit committees have identified as helpful to discuss with their auditors in understanding risks or impact related to remote work, such as:
- Increased communications with the auditor – The majority of audit committee chairs have been communicating more frequently with their auditors as a result of the pandemic, particularly regarding the following topics:
- Trends auditors are seeing across their client base, particularly those pertaining to industry peers;
- Areas of the audit that may or will warrant increased attention due to the effects of COVID-19, as well as how the auditor plans to approach those areas;
- Which disclosures may need to change as a result of COVID-19; and
- Potential challenges to a timely completion of the audit.
