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.
Drew Fekete is Underwriting Manager, Miscellaneous Medical, at Beazley. He joined Beazley's Miscellaneous Medical & Life Sciences team in 2018 as the sole west coast Allied Health underwriter with a focus on growing their presence in the region. Using Beazley's Medical Professional product as well as its pioneering Virtual Care form, Drew developed relationships and marketed throughout Southern California, growing his book of business with creative coverage solutions on some of the industry's most complex and difficult-to-place insureds. In 2019, Drew relocated to Denver to assist in the buildout of Beazley's newest office.
Anna is a Managing Director in Accenture's Insurance practice, based in Milan, and the Executive Sponsor for the Qorus-Accenture Innovation in Insurance Awards. She leads transformation programs for major insurance companies, focusing on data and AI, adoption of digital platforms for managing new risks and the regulatory challenges of the Italian market. Anna has a master's degree in Management Engineering and Financial Management from the Polytechnic University of Turin and a specialization in Financial Innovation Management from SDA Bocconi.
Brad Rapking is the portfolio manager Aptus Capital Advisors responsible for equity research, portfolio reviews and assisting in fund trading and operations. He is a CFA Charterholder and a member of the CFA Institute and CFA Society of Alabama.
Prior to joining Aptus, Brad was a research analyst at Driehaus Capital and a research analyst and equity trader at Opus Capital Management. Brad is a member of the CFA Institute and the CFA Society of Alabama. He graduated from Xavier University with a BSBA in finance.
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).
