Members’ Conference on ‘COVID 19 Impacts on Financial Reporting and Audit’
In the backdrop of pandemic COVID 19 rampant holocaust in Bangladesh as well as over the world, ICAB has organized the Members’ Conference on ‘COVID 19 Impacts on Financial Reporting and Audit’ on 20 June 2020 through Zoom Video Conferencing where Muhammed Farhad Hussain FCA, Past President-ICAB was present as the Chief Guest. Nasir Uddin Ahmed FCA, Member Council and Past President of ICAB acted as the session chairman while Sabbir Ahmed FCA, Vice President-ICAB and Partner, Hoda Vasi Chowdhury & Co, Chartered Accountants presented the keynote paper. ICAB President Muhammad Farooq FCA delivered address of welcome. Vice Presidents, Members Councils, Past Presidents and Fellow Members of the Institute spontaneously participated in the conference.
ICAB President Muhammad Farooq said, as professionals we cannot avoid any financial reporting or auditing requirement during ongoing pandemic situation. For auditors, the uncertainty arising from the current environment may increase the challenge in obtaining the sufficient appropriate audit evidence needed to form an independent view about the reasonableness of management’s estimates and judgments, he cautioned.
Auditors will also have to exercise significant professional judgment and professional skepticism and must remain focused on their ethical responsibilities and the public interest, he advised and urged the auditors to consider some issues prudently during this pandemic, like Professional Judgment and Professional Skepticism, Planning?Risk Identification and Assessment, Audit Evidence, Auditing Accounting Estimates, Going Concern, Auditor Reporting and Subsequent Events.
As the Chief Guest Muhammed Farhad Hussain FCA said, the pandemic COVID 19 has huge impacts not only on Bangladesh’s economy but also global economy. Each and every sector of the economy have been disrupted caused by the crisis. Mr. Hussain expressed grim concern on how will the economy recover. If the situation continues for long period, the stimulus packages which have been announced by the government, may not be fruitful either. In many aspects the accounting profession might be affected, he said citing some examples from neighboring country India. He said, auditor’s estimate, assumption and projection in audit report would not be reliable because at present the situation is very much unpredictable. We do not know when the trajectory of COVID 19 will end, he lamented. In this situation he suggested for finding out alternative audit procedures. Auditors must be cautious for auditing during this balance sheet period, he suggested.
Sabbir Ahmed, FCA, Vice President, ICAB and Partner, Hoda Vasi Chowdhury & Co presented Keynote paper on ‘COVID-19 Challenges on Financial Reporting and Auditing’. He discussed some technical aspects of the Financial Reporting and the Auditing.
On Significant Increase in Credit Risk (SICR) & Expected Credit Losses (ECL), he said, IFRS 9 sets out a framework for determining the amount of expected credit losses (ECL) that should be recognised. It requires that lifetime ECLs be recognised when there is a significant increase in credit risk (SICR) on a financial instrument.
Mr. Ahmed mentioned that a number of assumptions and expectations underlying the way ECLs have been implemented previously may no longer remain valid in the current situation resulted from COVID 19. Therefore, each entity needs to re-assess their credit risk, timing and uncertainty of future cash flows, moratorium in repayment declared by Government, potential insolvency of customer and other related factors to calculate provision for impairment.
He also said, there are some guidance from IFRS Foundation on how consider government or bank declared moratorium on loan repayment (payment holiday) and whether those would result in SICR.
Although in Bangladesh, Banks and NBFI follow Bangladesh Bank Circulars to calculate required loan loss provision which are based on actual duration of overdue/arrear (i.e. incurred loss model under earlier IAS 39) and hence IFRS 9 ECL model is not applicable for those entities. Nevertheless, other entities having trade and other receivables need to consider COVID 19 impact to assess ECL of those balances., he went on.
He also described the fair value measurement and classification of financial asset, and some relevant areas of financial reporting.
During pandemic Covid 19 period the learned paper presenter pointed out some audit areas which require special attention. These are like Reliable data and information to validate critical estimates and judgments, Travel and movement restrictions, Alternate method of evidence gathering and documentation, potential COVID 19 impacts on audit with reference to the related auditing standards, etc.
Auditors need to maintain continuous communication with management and TCWG and constantly make them aware of any audit related issues, like restrictions of movement or difficulties in obtaining audit evidence, scope and timing of audit, modifications to audit plan and key audit matters (KAM), disagreements on key estimates and judgments taken by management on COVID 19 related impact, etc., Mr. Ahmed suggested.
Nasir Uddin Ahmed FCA, Member Council and Past President of ICAB summarized the discussion of the conference.