FRC Allows Some Leeway In Audit Reports Amid Virus Turmoil

Law360, London (March 16, 2020, 1:12 PM GMT) -- U.K. companies must ensure that their accounts are audited to proper standards despite the upheaval caused by the COVID-19 pandemic, even if this means delaying company reporting, Britain’s audit watchdog said Monday.

The Financial Reporting Council said that the current outbreak should not stop auditors from completing high-quality audits and that they should continue complying with their responsibilities. Companies can delay their financial reporting if auditors need extra time to complete checks on their accounts.

But the FRC acknowledged that some companies and auditors are facing practical difficulties in preparing accounts, given restrictions on travels, meetings and access to business sites. Audit firms may need to consider developing alternative audit procedures when gathering information, the regulator recommended.

“Given the growing impact of coronavirus on the global economy and the high degree of uncertainty, high-quality audits are vital to ensure users of financial statements are properly informed,” said David Rule, the FRC’s executive director of supervision. “In many instances, auditors will need to consider developing alternative audit procedures to gather sufficient, appropriate audit evidence.”

The watchdog said that auditors must consider the impact of the novel coronavirus on how they gather information and how it affects their assessment of a company’s profits. 

Auditors must also ensure that companies are adequately disclosing in their annual reports the impact of the COVID-19 disease on their business, the FRC said.

The regulator said it is holding weekly calls with Britain’s largest audit firms and will continue to monitor the situation.

Other regulators have been relaxing rules. Central banks across Europe, including the Bank of England, have cut interest rates and lowered capital buffers in a bid to shield the economy and encourage spending.

And the European Banking Authority has decided to delay its 2020 stress test for one year to allow lenders to focus their operations and support their customers during the global epidemic.

--Editing by Rebecca Flanagan.

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