Economic upheaval triggered by the coronavirus pandemic leaves an uncertain outlook for 2021.
In a volatile and challenging environment, what are the key topics for the Audit Committee?
For the Audit Committee, setting the right priorities can be a particular challenge. Our recommendations help you get it right.
Recommendation 1: Reassess your agenda and associated workload. Adjust both to reflect the change in circumstances.
Last year’s experience showed that crisis situations put pressure on the Audit Committee in particular. Risk management remains of central importance and must be reviewed continuously. Does the Audit Committee have sufficient time and expertise to monitor all risks (and have you considered cyber risks)? How are you addressing the increased compliance risks? What about the new ESG requirements?
Recommendation 2: Focus financial reporting on the impact of COVID-19 and on the internal control system.
Uncertainty as to how the pandemic will develop impacts financial reporting in many ways. Have you paid particular attention to impairment in the past financial year, especially goodwill and other intangibles, as well as fair values (of financial assets), and, if applicable, the going concern assumption? There will also be questions about disclosures on the impact of COVID-19 as well as the presentation of non-financial KPIs. Your internal control system needs to be adjusted as risks have shifted. Have you verified that IT controls have been adapted in light of remote working scenarios, and that related cyber risks are considered?
Recommendation 3: Understand the implications of COVID-19 for your auditor’s activities.
As the Audit Committee, you should have an understanding of the auditor’s concerns and responsibilities in the context of COVID-19. The change in the overall risk environment has led auditors to reassess the risks of material misstatement in the financial statements. Beside the topics of going concern, impairment and cyber risks – as mentioned above – areas of relevance in Switzerland include COVID-19 bridging loans and their use as well as the corresponding provisions of the Joint and Several Guarantee Act (Solidarbürgschaftsgesetz), where applicable. Particularly in the case of national regulations, it is important to understand whether there will be tasks for the auditors as a result and, if so, which. Discuss these points in advance with your auditors. Also talk about how a lockdown, for example, would impact the audit and work schedule.