There is much respect and appreciation for those who work on the frontlines of the fight against Covid-19. Without their willingness to bear their jobs’ higher risk of exposure to the virus, our lives would have descended into utter chaos and peril.
As the pandemic rages on, others will be called upon to play their part with similar dedication and competence. In the coming months, it is likely that the spotlight will be on the accountants and auditors as well, given the large number of businesses that complete their fiscal year on 31 December.
Although these professionals are focused on the bottom line rather than the Covid-19 frontline, their role in relation to the global health emergency should not be underestimated.
Taking stock
In ordinary times – remember those days? – it is essential that people have the assurance that financial statements give a true and fair view, and that audit opinions are backed by solid work and judgment. The pandemic has not changed that, but it has introduced a note of urgency in the response to this perennial question: how are we doing?
The spread of Covid-19 has throttled the economy, turned the way we interact upside down, loosened our control of many things and generally cast a pall over all that we do.
As we approach the end of a horrid year, we have to take stock of our finances so that we can better figure out what we can do in 2021 and beyond.
Nobody is untouched by the pandemic. The business world fully feels the sweep of the virus because its full spectrum of stakeholders is affected.
Address the impact
Before we move on, there must be a proper summation of the impact. Accounting data will surely form a major part of such a survey of the damage. Financial statements can show how many have crashed into the wall of insolvency, who is in the best position to ride out the storm, and the exact location of the trouble spots.
As we approach the end of a horrid year, we have to take stock of our finances so that we can better figure out what we can do in 2021 and beyond
The accounts collectively form a picture of the financial health of the business sector and help policymakers in prescribing remedies. The reliability of the information is therefore critical, which means that accountants and auditors are expected to do their jobs well.
Yes, that always holds true, but a once-in-a-century public health crisis brings many unique and novel circumstances that complicate the preparation and audit of financial statements.
Multiple challenges
On its website, the International Federation of Accountants (IFAC) notes that the consequences of the pandemic on financial statement reporting and audit engagements are complex, and have resulted in challenges for management, those charged with governance and auditors.
‘There is an unprecedented level of uncertainty about the economy, future earnings and many other inputs that represent fundamental elements of financial reporting,’ says IFAC.
It adds that the uncertainty arising from the current environment may make it harder to obtain the sufficient appropriate audit evidence needed to form an independent view about the reasonableness of management’s estimates and judgments.
A once-in-a-century public health crisis brings many unique and novel circumstances that complicate the preparation and audit of financial statements
In addition, travel restrictions and work-from-home arrangements will probably compel preparers and auditors to operate differently, including learning more about technology.
There have been ample alerts and reminders from accounting bodies and regulators. For example, in its Annual Inspection Report 2019, released in August, Malaysia’s Audit Oversight Board points out that the immediate focus of audit firms should be ‘to maintain high standards of audit quality, particularly in light of the various challenges that auditors face as a result of the pandemic’.
Ultimately, it is about adhering to standards and maintaining quality. We do not necessarily have to count on sacrifice and heroism to take us down the right paths in the face of a grave threat. More often than not, all that is required is that we fulfil our duties with diligence and conscientiousness.
