Newsletter May 2020 SINGAPORE
Audit practice - COVID-19 Accounting Implications: Subsequent Events and Going Concern Introduction Many of our clients are expected to be adversely affected by the 2019 Novel Coronavirus (COVID-19) to a greater or lesser extent. The outbreak of COVID-19 has affected many client’ operations, subsidiaries, joint ventures, associates or investments and the entities t hat they trade with. The full impact of the COVID-19 outbreak on the world economy is yet to be seen. What is certain is that there will be financial impacts arising from the impacts of COVID-19. Given the timing of the outbreak, this practice aid discusses the impact of COVID-19 on the assessment of management’s going concern analysis and the impacts of events after the reporting date (together with disclosure considerations) for financial periods ending 31 December 2019 or prior and later. The considerations detailed in this practice aid may also be relevant to entities with financial years ending in 2020 and beyond.
Discussions with senior management and those charged with governance are essential in understanding their assessment of the impacts to date and estimated changes to forecast operating condition and financial information (including revisions to budgets and impacts on forecast cash flows and the carrying amounts of assets and liabilities). Audit engagement teams should: •
Meet/Discuss with management to understand their assessments and obtain updated operating and financial information and to understand key financing arrangements (including intercompany funding – receivables and loans / payables)
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Assess the information provided by management including obtaining sufficient appropriate Audit evidence to support our work and consider whether that has or could have material impacts on the business and its financial position subsequent to year end
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Assess whether subsequent events are adjusting or non-adjusting, including their impact on the going concern assessment. For Audit engagement teams who would like to consult in respect of subsequent events disclosures.
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In respect of going concern, where the analysis indicates there are elevated risks, evaluate whether there are uncertainties, the
Key points As part of the concluding procedures Audit engagement teams should exercise increased professional scepticism when focussing on the effects of COVID-19 and the client’s assessment of going concern and subsequent events together with relevant disclosures.
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