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.
Deb Seidman has over 25 years' experience working to enhance the effectiveness of leaders and their organizations, enabling them to execute their business strategy. She has worked with clients across a range of industries including financial services, pharmaceuticals, technology, government, and non-profit. Throughout her career, both in corporate operating roles and as an external consultant and coach, she has partnered with clients to gain insight into business challenges and opportunities, foster collaboration within and between teams, and facilitate organizational transformation. She holds a Bachelor of Science degree in Industrial and Labor Relations from Cornell University and a Master of Arts degree in Politics from New York University. She is an IAF Certified Professional Facilitator. Deb lives in New York City where she can be found at her printmaking workshop creating lithographs and woodcut prints.
Guillermo Rodriguez has occupied diverse roles over the past 20 years, from in-house corporate positions to being a self-employed consultant, and is currently serving as a virtual CFO at Summit Virtual CFO by Anders. His journey began with a major corporate job, where he had the opportunity to explore various functional departments, gaining insights into different aspects of the business, including forecasting around a significant acquisition. He later became a virtual CFO within the cannabis industry, helping guide cannabis operators down the path of profitability.
Shane Hamby is the vice president of products at Stampli, the leader in AI-powered accounts payable automation and payment services.
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).
