How the auditing profession is navigating COVID-19 shocks

The auditing profession is facing challenges as JSE listed companies are delaying the publication of their financial statements and annual reports due to the impact of COVID-19 lockdowns. Auditors from top firms like KPMG, EY, and Deloitte are navigating through these uncertain times to ensure the accuracy and quality of financial information for investors. Tara Smith from KPMG, Steven Ntsoane from EY, and Andrew Mackie from Deloitte shed light on the difficulties and opportunities presented by the current situation. Tara Smith highlighted the practical challenges faced by auditors during the lockdown. The transition to remote auditing has brought about different initiatives and challenges, requiring auditors to adapt to new ways of working with clients. Despite these hurdles, Smith mentioned that there have been some positive steps forward in terms of audit processes. Steven Ntsoane discussed the two-month extension granted by the JSE for companies to publish their financial statements. He emphasized the importance of maintaining audit quality despite the delays caused by COVID-19. Ntsoane explained that companies are facing challenges in providing accurate forward-looking information due to the uncertainty surrounding the pandemic and its impact on businesses globally. Andrew Mackie highlighted the unprecedented levels of uncertainty in financial statements, particularly in areas like impairment calculations and going concern assessments. He noted that the future is unclear, making it extremely challenging for clients to forecast accurately. Mackie stressed the importance of enhanced disclosures to provide users with a range of scenarios for the future. When discussing the audit opinions expected in light of COVID-19, Tara Smith mentioned that the focus remains on obtaining appropriate audit evidence and addressing uncertainties and estimations in financial statements. While there may be certain disclosures and highlights in the statements, it may not necessarily result in modifications to audit opinions. Steven Ntsoane raised concerns about the material uncertainty faced by companies due to the pandemic. He highlighted the need for auditors to assess whether companies have made adequate disclosures in their financial statements regarding these uncertainties. Ntsoane mentioned that while there may be increased disclosures, it may not always lead to going concern qualifications, provided that companies adequately disclose the impacts of COVID-19. Andrew Mackie addressed the challenges faced by banks in accounting for their loan books under IFRS 9. He discussed the complexities of financial modeling and the difficulty of predicting future losses in a scenario like the current pandemic. Mackie emphasized the importance of exercising wise judgment to strike a balance between prudency and capital requirements. In terms of shaping the audit industry post-lockdowns, Tara Smith expressed optimism about the profession coming together to focus on audit quality. She highlighted the need for innovative approaches in auditing processes and the commitment of the profession to ensuring accurate financial information for investors. Smith acknowledged that the crisis has brought about changes in the industry, signaling a shift towards more collaborative and quality-focused auditing practices. Overall, the auditing profession is navigating through unprecedented challenges brought about by the COVID-19 pandemic. Auditors are adapting to remote working, uncertainties in financial statements, and the need for enhanced disclosures to provide investors with a clearer picture of company performances. As the industry evolves post-lockdowns, the focus remains on maintaining audit quality and bolstering investor confidence in financial reporting.