The ups and downs in the economy during the novel coronavirus pandemic are causing audit committees at public companies to focus on the disclosures in their financial statements and SEC filings about the current and potential impacts of COVID-19, according to a new report from KPMG.
The report, Challenges Presented by COVID-19, found that companies are reassessing, enhancing or establishing new internal controls due to pandemic-related disruptions to their business operations. Meanwhile internal auditors are adjusting their audit plans and activities.
Mark Lowers is the president of the Secure Cash & Transport Association.
Jennifer Overhulse is the principal owner of St. Nick Media Services. She is a writer, a content creation specialist, and a public relations (PR) authority with an extensive journalism background and insurance expertise specifically related to trends driving the adoption and implementation of insurance technology (InsurTech), its impact on greenfield and incumbent insurance companies, distribution channels, startup partners, and the industry at-large. Jennifer has over 25 years of writing and editing experience. Her sweet spots lie in identifying issues, niches and opportunities for clients, developing and applying go-to-market strategy, and creating provocative content that resonates with targeted audiences.
Bill Kirk is a USAF Gulf War Veteran and CEO Co-founder of Weather Trends International. He has been featured on Fox Business, CNBC, ABC 20/20, has been named as inventor/co-inventor on three U.S. and U.K. patents, and published research in hundreds of Wall Street equity reports from JP Morgan, Morgan Stanley, Cowen, and other industry tech reports. Their weather forecasting technology for predicting the most accurate YEAR-AHEAD weather forecasting with predictive sales analytics for Fortune 500 companies has received 13 national and international business technology awards.
Forecasting has become more challenging, including developing assumptions for the recoverability of goodwill and nonfinancial assets, as well as the realizability of deferred tax assets, making going-concern determinations and figuring other asset impairments more difficult, according to the report.
Nevertheless, audit committees are adapting to the new environment, as their companies allow more flexibility for remote work. Among the biggest areas of concern cited by the 114 U.S. audit committee members polled by the KPMG Audit Committee Institute are disclosures about the current and potential effects of COVID-19 (79 percent), preparation of forward-looking cash flow estimates (48 percent), and impairment of nonfinancial assets such as goodwill and other intangible assets (43 percent).
Audit committee members indicated that the remote work environment accelerated by COVID-19 has so far had little impact on the efficiency and effectiveness of their interactions with the management team and auditors.
Companies are reassessing their internal controls in response to COVID-19-related disruptions to their business operations. The most commonly cited disruptions included return-to-work plans (73 percent), IT system access and authentication for remote workers (69 percent) and cybersecurity (66 percent).
Audit committee members expect some environmental, social and governance issues to get much more attention from boards as a result of COVID-19 and recent protests against systemic racism. Survey respondents cited employee health, safety and well-being (85 percent), diversity within the company including the boardroom (53 percent) and corporate reputation (39 percent) as areas of greater focus for boards.
The pandemic has also caused many audit committees to reassess the scope of their workload agendas in addition to their risk oversight responsibilities. Most audit committee members who responded to the survey cited oversight responsibilities for a variety of COVID-related risks, including financial risks (83 percent), legal and regulatory compliance (70 percent), cybersecurity (62 percent) and data privacy (42 percent).
