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.
Steph Tulley is the founder and CEO of Actuology. Tulley propels sustainability and success through: innovative economic strategy, dynamic consumer knowledge, and deep industry insight. Actuology's high-paced leader builds technology to augment human interaction, and future-proof the success of her industry.A New Yorker by birth and a quasi-Nomad by nature. When she is not working, Tulley has an adventurous streak. She has been known to spend countless hours playing in the field of natural history, and extreme wildlife photography.
Dror Pockard is Chief Strategy Officer at Earnix. He has over 30 years of experience building and leading start-ups, and in senior executive roles in large global companies. His expertise lies in strategy, business development, and M&A.
Prior to joining Earnix, Dror was CEO of Colibri Spindles Ltd., a company focused on connecting Industry 4.0 manufacturing devices with the emerging Internet of Things (IoT) market. Prior to that, he was CEO of eGlue Business Technologies, a start-up in the real-time interaction/next-best-offer space. And prior to that, he was CEO of Telrad Ltd. a telecom products and services company.
Earlier in his career, Dror held several leadership roles at Amdocs Inc., including: head of their Consulting and Systems Integration Organization, and president of the CRM division. Dror also established the Israeli office of Ernst Young Management Consulting and managed it for 3 years.
Dror holds an MBA in Information Systems and a BA in Management and Economics from Tel Aviv University, Israel. He is a mentor in the Israeli Microsoft Accelerator, and is a board member of the Branco Weiss Institute and Yuvalim, two charities in the education space.
Ifty Kerzner is President and Co-Founder of Kissterra, the world's first insurance marketing operating system. A skilled tech entrepreneur in the financial service and data management sectors, Ifty's passion for business, innovation, and people led him to found several companies. Prior to his career in tech and business, Ifty was part of the Israeli entertainment industry, as both a popular singer/songwriter and host of a TV show. He holds an LLB with distinction, an M.A. in Political Science, and is also a graduate of the Lyndon B. Johnson School of Public Affairs' Leadership Program.
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).
