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.
Dennis J. Moore is CEO of the Financial Planning Association, the leading membership organization and trade association for certified financial planners and those who support the financial planning process.
A CFP himself, Moore has served as an elected president in a volunteer capacity for various organizations, including the Texas Tech University Personal Financial Planning Alumni Advisory Board, the FPA of West Texas, the FPA of Dallas/Fort Worth and the FPA Board of Directors.
Moore holds a bachelor's degree in personal financial planning and an MBA from Texas Tech University, where he is pursuing his PhD in personal financial planning.
Matt Baki is SVP of Strategic Accounts at Tria Health.
Peter Nesbitt is COO of Teampay, a distributed spend management platform. He most recently served as Teampay’s vice president of finance. A former military intelligence officer, Nesbitt has a diverse background, with his expertise spanning financial leadership, fundraising and revenue growth. Prior to joining Teampay, he served in executive corporate finance roles, including director of finance at Bitly. He earlier co-founded TheFam, a music collective and events community in New York City, and served as a mergers and acquisitions analyst at an investment bank.
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).
