One of the two biggest areas of concern is the ability to perform work in order to meet deadlines, says Carol Paradine, CPAB’s CEO. “That ability is driven by the resources and number of people that are able to work, and whether they can use technology to work from home or not,” she says. (Getty Images/Westend61)
On March 18, the Canadian Securities Administrators announced a 45-day extension for financial statements and other periodic filings normally required to be made by issuers, investment funds, registrants, certain regulated entities and designated ratings organizations on or before June 1.
This is one of the most recent regulatory changes that will be taking place in light of the COVID-19 outbreak. According to Carla-Marie Hait, chief accountant and CFO of BC Securities Commission: “The CSA Chief Accountants Committee will continue to communicate with audit firms, the Canadian Public Accountability Board (CPAB), OSFI and other stakeholders about accounting and auditing issues that preparers and auditors are facing as a result of COVID-19.”
To that end, CPA Canada has set up a COVID-19 financial reporting and auditing resource hub linking the latest information and guidance from regulators, auditing firms and professional bodies.
Experts report that issues around auditing and reporting are many, from staffing and access to documents and workers, to uncertainty around accuracy and transparency.
THE AUDITING PERSPECTIVE
One of the two biggest areas of concern is the ability to perform work in order to meet deadlines, says Carol Paradine, CPAB’s CEO. “That ability is driven by the resources and number of people that are able to work, and whether they can use technology to work from home or not,” she says.
A large part of auditing involves in-person visits to premises where access is now restricted. “You can’t dial in to do an inventory audit; and we’re not in a position to see the widespread use of drones—not to mention the security concerns around remote access,” explains Paradine.
The second concern that is top of mind is auditing and accounting outcomes, particularly in areas such as valuations. “A March period year-end or quarter-end uses stock prices on that date. But is that going to be the right one?” she says. “What discount rates are necessary, and how do you figure out what they should be? There is a whole raft of things that will require additional work and disclosures for those preparing financial information.”
The crisis has accelerated efforts to rethink the way auditing functions are performed that could carry on well into the future, she adds. “We are all learning to use technology in ways we have never done before and finding ways to access data electronically in a secure manner. This could be a potential long-term effect that increases the flexibility and productivity in how we do business.”
THE FINANCIAL REPORTING PICTURE
In a market where so many variables are fluid, normal assumptions can no longer apply when preparing financial statements, notes Karen Higgins, partner, audit advisory with Deloitte Canada. While most of the larger publicly held companies have already issued their year end statements, smaller organizations are likely behind in meeting the original March 31 filing deadline.
“The smaller and mid-market companies are the ones struggling to meet deadlines,” she says. “They may be more paper-based. They may not have documentation fully digitized or don’t have the ability for their employees to work effectively from home.”
Private companies may need to negotiate deadline deferrals with more than one stakeholder to receive some relief, she notes. “Private companies still have to issue audited statements for their banker, investor or other stakeholder for contractual compliance reasons.”
Another often-asked question is how to account for and adjust statements for what is happening today, Higgins says. “You may need to adjust balances and transactions that are being impacted by COVID-19. That requires a lot of estimation and a significant amount of disclosure relating to the uncertainties in the estimates,” she adds.
Communication will be key throughout the process, says Higgins. “It is essential they [organizations] always communicate clearly and effectively and in as timely a way as possible about their assumptions, adjustments and alternatives in the numbers they are presenting. It’s crucial to keeping relationships with all stakeholders as strong as possible.”
MORE COVID-19 UPDATES
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