Deloitte warns of heightened going concern risks as pandemic rumbles on
Big four audit giant Deloitte has warned there is likely to be more reporting of uncertainties relating to going concern as unpredictability surrounding the pandemic continues.
Deloitte audit partner Ann Aspinall told City PM that as uncertainties around the pandemic continue and as the economic environment becomes more challenging, “there is likely to be an increase in the reporting of uncertainties relating to areas like going concern.
“Clear disclosures in both the front and back half of annual reports about the key judgements and estimates that have been made, have never been more important,” she continued. “These should help those reading the financial statements make their own judgements about the company.”
Going concern is an accounting term for a company that is financially stable enough to meet its obligations and continue its business for the foreseeable future.
Lockdown ‘a real challenge’
The audit partner said the disruption caused by the pandemic affected Deloitte’s audit practices as much as the businesses it audits.
“Another lockdown, particularly at this time of year when many businesses are approaching the end of their financial year and when finance functions and their auditors are often at their busiest, is a real challenge,” she admitted.
England entered a four-week long nationwide lockdown on 5 November following an increase in coronavirus cases and deaths. The government has said the restrictions will last for four weeks.
Back in March, when the UK first entered into a nationwide lockdown, all 2,000 of Deloitte’s UK auditors had to adjust to operating remotely. At the time many audits were nearing completion and so there were few times a whole audit had to be conducted remotely.
“While we don’t know exactly when this lockdown will end, we’ve been taking time to make sure our audit teams are ready and we’re confident we can conduct the whole audit remotely if needed,” Aspinall continued.
“The restrictions we’ve had on travelling and visiting offices have pushed us to work in new ways that we may use elements of going forward – for instance, attending stock counts virtually as well as physically, or creating virtual audit rooms so that auditors working in different countries and locations can work far more collaboratively on a real time basis.
“Our absolute priority of course remains audit quality and we will never compromise that. Since March we’ve had to delay a number of audit opinions until we were fully satisfied we’d gathered sufficient evidence to support our opinion. We’ll continue doing this where it’s necessary.”