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.
Chandan Lodha is the co-founder and president of CoinTracker, the leading portfolio tracking and tax compliance software for cryptocurrency. Since co-founding CoinTracker with Jon Lerner in 2017, the company has helped users file over a million tax forms. Before founding CoinTracker, he was a product manager at Alphabet, working on Project Loon (internet for rural parts of the world via stratospheric balloons), Google Now and Knowledge Graph. He received his BA degree with high honors in chemistry and physics from Harvard University.
Robert Cruz has been with Smarsh for over ten years as the Vice President of Regulatory and Information Governance. His primary objective is to help Smarsh customers stay informed of regulatory developments and deploy best practices in the use of digital communications technology. Robert is a recognized author, speaker, and subject matter expert in the area of digital communications compliance and brings over two decades of leadership in the governance, risk, and compliance market.
Chris Arnold is the Vice President of Contact Center Strategy at ASAPP, where he partners with leading insurance carriers to modernize claims, billing, and customer service operations with AI. With more than 15 years of experience in customer experience transformation and contact center innovation, he specializes in helping enterprises operationalize AI to drive measurable efficiency and improve policyholder satisfaction.
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).
