Auditor’s Reporting Key Audit Considerations amid COVID-19

The auditor’s responsibility for forming an opinion on the financial statements is dealt with in SA 700 (Revised), ‘Forming an Opinion and Reporting on Financial Statements’. SA 700 (Revised) deals with unmodified auditor’s opinion. SA 705 (Revised), ‘Modifications to the Opinion in the Independent Auditor’s Report’ deals with the auditor’s responsibility to issue an appropriate report in circumstances when, in forming an opinion in accordance with SA 700 (Revised), the auditor concludes that a modification to the auditor’s opinion on the financial statements is necessary. SA 705 (Revised) requires that if the auditor:

> concludes that, based on the audit evidence obtained, the financial statements as a whole are not free from material misstatement; or

> is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement, the auditor shall modify the opinion in the auditor’s

This responsibility is heightened in the present situation, where COVID-19 and its related preventive measures, such as lockdown and travel restrictions by the Government of India have impact on business operations.

Management’s Responsibility

While preparing the financial statements, considering the nature of business of the entity, the management needs to make a detailed assessment (to the extent possible based on the information available) of the impact of COVID- 19 on the items, components of the financial statements including disclosures in the financial statements (e.g. appropriateness of carrying values of goodwill and other intangible future operating results, cash flows and financial position of the entity. Other disclosures may include business risk factors and management’s discussion and analysis of results, liquidity and capital resources. In this context, the auditor should also consider the requirements of SA 720(Revised), “The Auditor’s Responsibilities Relating to Other Information”.

It is possible for the management of an entity carrying on the business of essential commodities to conclude that there is no impact on the operations of the entity. However, the management should also consider the related factors, such as the possible disruption of the supply chain, availability of customers for its commodities, and take an informed decision on whether its operations are impacted or not.

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Compendium of Auditing Guidance Issued by Auditing and Assurance Standards Board on Various Aspects amid COVID-19