ICAI issues Guidance Note on Subsequent Events-Key Audit Considerations amid COVID-19

ICAI - COVID-19 - Audit Conderations - Taxscan

The Institute of Chartered Accountants of India (ICAI) has released an Auditing Guidance on “Subsequent Events-Key Audit Considerations amid COVID-19” for the benefit of the members.

The Institute comes out with an advisory and guidelines for financial statement preparers and auditors.

The guidance note highlights the key areas where the focus is desired due to COVID-19 pandemic on events occurring between the date of the financial statements and the date of the auditor’s report (i.e. subsequent events) and the effect, if any, of such on the entity’s financial statements.

Further, the guidance note lists out the auditor’s responsibilities in relation to obtaining sufficient appropriate audit evidence about subsequent events impacted by the COVID-19 pandemic. It also gives examples of events or conditions that may be affected by, or exist as a result of, the COVID-19 pandemic.

The advisory for auditors is to, “carefully evaluate circumstances prevailing in their audits and assess risk accordingly when applying the concepts given in the Advisory in their audits,” the ICAI President said in the official statement.

It has been clarified that the guidance note does not amend or override the Standards on Auditing (SAs) 560 which sets out the auditor’s responsibilities with respect to subsequent events.

However, the significant features of the guidelines were that the auditor needs to give special attention to scenarios like valuation of inventory on a date other than the date of financial statements, an audit of consolidated financial statements where components/component auditors are located in severely affected places, subsequent events or events after reporting date, going concerned and so on.

Further, auditors have a public interest obligation to complete the audit work in accordance with professional standards and ethics requirements and under the current circumstances. Thus, auditors must recognize the specific aspect they need to report to address the challenges and uncertainties arising out of the impact of COVID-19.

The key areas to be considered during this pandemic includes inventory Measurement, impairment of Non-Financial Assets such as PPE, goodwill and Intangibles, Financial Instruments, leases, revenue, Provisions, Contingent Liabilities, and Contingent Assets, modifications or Termination of Contracts or Arrangements, Going Concern Assessment, Income Taxes, Consolidated Financial Statements, Property, Plant and Equipment, Presentation of Financial Statements, Borrowing Costs, Post Balance Sheet Events, and Interim Financial Reporting.

To Read the full text of the Guidance Note CLICK HERE