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COVID-19: GFSC update to auditors and firms on submission requirements for financial statements

30 Mar 20

The COVID-19 (Coronavirus) pandemic is significantly impacting auditors and their clients. Whilst the GFSC expects auditors to continue to follow and comply with standards in respect of audits we understand and acknowledge that there are certain challenges caused by the outbreak which could have an impact on audit quality.

We have followed closely, the recommendations and statements issued by the relevant bodies in the UK in respect of audits, as well as the guidance issued by the respective European supervisory authorities (e.g. EBA) in relation to the accounting treatment of certain items within balance sheets etc.   

We have also discussed with the Gibraltar Society of Accountants, the industry’s representative body, how best to address a number of scenarios around the completion of audits. 

As a result, we have considered that the following would represent a prudent and pragmatic approach: 

1. We are applying a moratorium of 4 weeks, commencing Monday 30 March and ending Sunday 26 April, to the signing off on Gibraltar statutory audits. 

  • The moratorium would not apply if completion of the audit is necessary in order to meet any other legal or regulatory requirement, outside those that relate to GFSC requirements.  
  • In applying this moratorium we consider that we will be easing some unnecessary pressure on companies and the audit profession at this moment in time.
  • It would, however, be up to an audit firm if it voluntarily decides it wants to sign-off an audit opinion in respect of its client during this moratorium.  
  • We will keep this period of moratorium under review subject to how matters develop.

2. We are extending the submission date for December year-end audited financial statements that are due to be submitted within 4 months of the year end, by 2 months i.e. from 30 April 2020 to 30 June 2020.   

3. Auditors should also note the following: 

  • Whether the planning conducted including the auditor’s risk and materiality assessments should be revisited and revised.
  • Auditors should obtain sufficient and appropriate evidence prior to issuing their opinion. Travel restrictions and availability of staff can affect the auditors’ ability to make this possible. Auditors should adapt and explore alternative methods, using technology where possible. In respect of group audits the group and component auditors should ensure their approach is updated given the current circumstances. The audit may require more time to be completed and the issue of the audit report may need to be postponed. Where this is not possible or will not result in any material difference, the auditor should modify their audit report in order to demonstrate that they have not been able to obtain the necessary audit evidence.
  • Going concern is a very significant area given the uncertainty of forecasts and outlook which many firms employ and auditors rely on for their assessment of this area. The evaluations of the management’s assessment of a firm’s ability to continue as a going concern on the audit report and in the communications to those charged with governance should be based on the current economic climate (which continues to change).
  • Auditors should assess what the impact of COVID-19 has had on the firm after its year-end. This would need to be disclosed as a subsequent event and should comment on the firm’s activities, its financial situation and future economic performance. Auditors may need to include an emphasis of matter in this respect and may possibly need to modify their audit report.
  • Auditors should consider whether information provided in the financial statements in respect of the firm’s financial position, the principal risks and its future development is consistent with the audit evidence obtained. They should communicate with the firm’s management and those charged with governance on the impact of COVID-19 on their audit work. The auditor may decide to include a key audit matter in their audit report. Depending on the type of firm, the auditor may need to report certain matters that may have been caused by COVID-19 to the GFSC or other regulatory authorities or bodies.