On 26th March 2020 the UK Financial Conduct Authority (FCA), UK Financial Reporting Council (FRC) and UK Prudential Regulation Authority (PRA) announced a series of actions to ensure that information continues to flow to investors and to support the continued functioning of the UK’s capital markets.
The guidance for companies highlights the need to agree new working practices if the usual forms of management and control are disrupted, and reminds Boards of the detailed consideration they need to give to capital maintenance. It addresses the difficulties companies currently face in making forward-looking judgements in their financial statements: for example, in strategic reports and viability statements, with a focus on appropriate disclosure of material uncertainties and going concern issues.
The guidance to auditors reminds auditors that they must obtain sufficient, appropriate audit evidence to support their audit opinion. However, in the current circumstances, they will need to consider the use of alternative procedures, including remote working and technology to obtain that evidence. This will not work in all circumstances and it is likely that there will be more modified opinions arising from the impact of COVID-19 on businesses.
In response to the unprecedented challenges raised by the crisis, the UK FRC will, where possible, delay or extend the deadlines for consultations; it has paused for at least a month writing to companies following its review of their annual reports and accounts; it is considering how it can adjust its audit quality review work to reduce demands on audit firms; and it will pause for at least a month requests to firms on supervisory initiatives, such as operational separation of audit practices.
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