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.
Ben Kosic leads Capco's Insurance Practice and Data Practice and is a subject matter expert in the areas of Insurance, Financial Crime, and Data & Analytics. He has experience working with Canada's largest insurance companies in developing and implementing a national consortium strategy to fight insurance fraud. Ben is adept at operating in complex multi-stakeholder environments, delivering 100+ successful consulting projects to 50+ clients. With 20+ years of data analytics experience, client acquisition, sales responsibilities, and client project delivery, he has a proven track record of driving sustainable and profitable growth.
Ozan Unlu is the CEO and Founder of Edge Delta, an edge observability platform. Previously he served as a Senior Solutions Architect at Sumo Logic; a Software Development Lead and Program Manager at Microsoft; and a Data Engineer at Boeing. Ozan holds a BS in nanotechnology from the University of Washington.
Chris Cooksey is the senior director of advanced analytics at Guidewire Software, the leading provider of P&C Insurance core operating systems. He previously served as Chief Actuary at EagleEye Analytics and spent more than a dozen years at Nationwide Insurance as a research director and pricing analyst.
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).
