The impact of coronavirus on accounting and auditing standards: Part 2

By Jessica Salerno, OSCPA senior content manager 

This is part two of a two-part article. Read last week’s part here

In an April 22 interview with OSCPA, Bob Dohrer, CPA, chief auditor at AICPA, answered a range of questions about how accountants and auditors should go about their work during the coronavirus pandemic when working in an environment that’s remote, with business closures and unexpected government guidance. 

The particular disclosures to focus on for reporting in this environment 

“First and foremost, that starts with management or the preparer of the financial statements,” Dohrer said. “US GAAP does have requirements around disclosures, addressing risks and uncertainties and subsequent events and even going concern if some of those circumstances are met. So, the first place I'd start with is to make sure that everyone is familiar with the requirements of US GAAP with respect to those types of disclosures.” 

When it comes to the auditor’s report, Dohrer said it's always the auditor’s discretion to use their professional judgment as to whether they want to add an emphasis of matter paragraph to their auditor's report. He said the additional paragraph should not disclose any information that's not already contained in a disclosure in the financial statements themselves. 

Dohrer said they’ve received questions about clients not wanting to make certain disclosures about a subsequent event or a risk and ask if it would be possible to add a paragraph to disclose that information. 

“And the answer to that is you can't do that using an emphasis of matter paragraph if it is a departure from US GAAP, then it should be a qualification of the auditor's report,” he said. “And of course, when qualifying the auditor's report, you can explain why you're qualifying. But that's not the same as an emphasis of matter paragraph and actually is more of a severe consequence to encounter.” 

Will there be any unmodified auditor reports this year? 

“In my personal perspective, my view is yes,” Dohrer said. 

He said they’re hearing more about businesses that were essential and were able to continue working despite interruptions, and those audit reports may not be modified. Other reports that might not be modified would be those of businesses with strong balance sheets that were able to weather the storm of lockdowns and stay-at-home orders with government assistance. 

It is possible that some auditor’s reports that contain emphasis of matter paragraphs or possibly going concern paragraphs will be a larger number compared to the previous year, Dohrer said. 

Additional guidance from standard setters and recommended best practice FAQs 

The AICPA is still receiving new questions on audit and accounting matters, Dohrer said, and encourages people to look at the AICPA Coronavirus resource page, as it’s updated frequently. They have an FAQ document on their A&A resource page in its second edition with added questions on auditors using SOC-1 and type-in reports for payroll processes. 

He said they recommend the FASB website, as they have proposed delaying the effective date of some aspects of the revenue recognition standard as well as the least standard. GASB is thinking similarly with deferring some of its standards. And recently the AICPA auditing standards board voted to delay statement on auditing standards number 134 through 140 for an additional year. 

New ways of working and opportunities for the profession 

Despite this current shift to remote, when more auditors are back in the office in the future Dohrer said the in-person client relationship will continue to be valuable, and there are many audit procedures that are done more efficiently if you're on site at a client location. 

“The circumstances that we have encountered have opened the eyes of the profession to think more creatively and innovatively about how they can utilize technology to accomplish the requirements embedded in our US auditing standards for private companies,” Dohrer said. “And that is going to have implications into the future, even when the social distancing and travel restrictions are relaxed.” 

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