Reference no: EM132840770

The consequences of the Covid-19 pandemic on financial statement reporting and audit engagements are complex and have resulted in challenges for management, those charged with governance (TCWG) and auditors.

• There is an unprecedented level of uncertainty about the economy, future earnings and many other inputs that represent fundamental elements of financial reporting. There will likely be substantial and multiple financial reporting implications to be considered by preparers of financial statements for the purposes of reporting in the short and potentially medium term.
• The uncertainty arising from the current environment may increase the challenge in obtaining the sufficient appropriate audit evidence needed to form an independent view about the reasonableness of management's estimates and judgments.
• It is important for preparers and auditors to engage in discussions assessing the impact early in the preparation timeframe and audit process, as there are likely to be issues that have not been previously encountered that may now need to be considered.
• Both preparers and auditors are affected by restrictions on travel and requirements to stay at home, which present practical challenges to the audit engagement.
• Companies may obtain information in new or different ways and/ or operate controls over the production of financial information differently. Audit firms may also have turned to remote working, utilising various technology tools available.
• Auditors will have to exercise significant professional judgment and professional skepticism and must remain focused on their ethical responsibilities and the public interest.

Required

Problem 1. Identify five major areas where auditors need to consider, or reconsider, how their work has been or will be affected by the pandemic.

Problem 2. Explain how the work of the auditors will be affected for each of the five major areas identified.