Sunday , August 14 2022

FRC Guides External Auditors on Considerations Over COVID-19

Financial Reporting Council (FRC) of Nigeria has offered a guide to external Auditors on their considerations during the Coronavirus pandemic in order to maintain high quality audit in Nigeria.

This was disclosed in a statement obtained via the agency’s website.

The Council stated that having understood the financial health of corporate entities, especially with the Coronavirus pandemic, it found it is necessary that additional time may be required to document, review audit engagements due to some measures taken by government to contain the scourge of COVID-19.

Some of the measures, according to the agency, are social distancing, and closures of non-essential services. Undoubtedly, these measures have triggered significant disruptions to businesses worldwide, resulting in an economic slowdown and other economic challenges.

FRC classified the situation into three major Audit categories. One is the Audit of 2019 Financial Statements, which have been completed, audit opinion
issued and report already released to shareholders. This only affects accounting issues in first-quarter reports and onwards.

The other category is the Audit of 2019 Financial Statements, which are still ongoing with respect to reporting periods ended on or before December 31, 2019.

Auditors are required to consider the adequacy of disclosures included in the financial statements as companies are required to disclose the events.

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Lastly, on audit of 2020 Financial Statements (Accounting periods ending on or after January 1, 2020), the guidance highlights the implications of the COVID-19 outbreak on audits and auditors in Nigeria and actions to be taken when carrying out audits during the current Covid-19 crisis in areas like New Audit Engagement; Audit Planning, Execution and Reporting.

It stated, “The guidance directs practitioners to demonstrate flexibility in their work pattern, which includes work from home arrangements, use of video/telephone conferencing, and electronic evidence.

“However, Auditors should apply alternative procedures if they are still not able to obtain sufficient, appropriate audit evidence as a result of differing levels of infrastructure in the country. If Auditors are still not able to obtain sufficient appropriate audit evidence, then they should consider modifying the opinion on the financial statements in line with ISA.

It added that the audited financial statements containing the modified opinion must then be brought to the Council’s attention in accordance with the provisions of the FRC Act.

Given the severity of the COVID-19 pandemic and its consequential impacts on employees, mobility, the financial systems, and the economy, “it is very likely that auditors may encounter scope limitations or complex auditing and accounting issues which may require audit teams to consider modifications to audit opinions.”

The FRC assured that it would continue to monitor the events carefully and issue necessary communication as the situation arises.

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