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.
Matt Buchanan is the co-founder and chief growth officer at Service Direct.
Grace Bronstein is the CEO of TrustLife Insurance Management, an advisory firm that supports CPAs, trustees, financial advisors and estate planning attorneys in properly managing trust-owned life insurance. She is also the COO of AllFinancial Group, an affiliate of TLIM, an asset management firm that provides non-recourse financing for life insurance policies. Previously, she was a litigation associate at Schulte Roth & Zabel. She is a graduate of Columbia University and Columbia Law School.
Brian Hart is founder and president of Flackable, an award-winning public relations agency representing financial and professional services brands nationwide. The agency, which he bootstrapped in 2014 at the age of 27, guides growth-driven brands to new levels of credibility, authority and influence through its innovative, integrated approach to public relations. His professional recognition includes Bulldog Reporter‘s 2021 Silver PR Star Under 40, PRNEWS’ 2020 Agency Elite Top 100, Irish America Magazine’s 2019, 2018 & 2017 Business 100, PRNEWS’ 2017 Rising PR Stars 30 & Under, Lehigh Valley Business’s 2016 Forty Under 40 and Adweek’s 2015 PR Industry 30 Under 30.
In 2020, Brian developed an industry-first client portal and automated campaign status reporting system, a platform delivering unprecedented campaign clarity, transparency and accountability. He leads and mentors a growing team of top public relations talent who routinely land Flackable’s clients in top news outlets including The Wall Street Journal, CNBC, Fox Business, Bloomberg, Forbes, Barron’s, US News & World Report, The Associated Press, Reuters and various industry trade press.
Brian is a Temple University graduate with a B.A. in Strategic Communication and a Political Science minor. He began his career as a licensed life and health insurance professional at a broad-based financial services firm in King of Prussia, PA. Prior to founding Flackable, Brian represented a number of leading financial services firms at a public relations agency in New York City and New Jersey.
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).
