Impact of COVID-19 Pandemic on Reporting and Assurance
In-Ki Joo Keynote Address for the ICAI Covid-19 Global Webinar
Dr. In-Ki Joo | IFAC President
Apr 13, 2020 | ICAI Global Webinar | English
President Gupta, ICAI leadership, distinguished colleagues, ladies and gentlemen, my name is In-Ki Joo. I am President of IFAC, the International Federation of Accountants.
I am proud to represent all of IFAC’s members and the work we do in a global context. It is my privilege and honor to speak with you.
Part of what brings us together today is also, of course, what is keeping us apart. Just two months ago, we didn’t expect the coronavirus would develop into pandemic that it has today. Now, it is afflicting almost every country throughout the world.
It is continuing to cause unprecedented challenges to our humanity, in terms of the public healthcare, economic stability and politics and culture.
It also now causes critical challenges to our profession.
I hope and I am sure that the world will cope with these challenges wisely and quickly through worldwide collaboration. I would like to thank you for accommodating my participation from afar, at my home in Seoul.
As we talk about global challenges and smart solutions, your thoughtful and proactive response to this crisis—balancing practical realities with our need to persist in our work—is a testament to your vision and leadership.
And I would like to congratulate you for this outstanding conference. I understand that about 50,000 people are joining this conference. Well done!
ICAI is one of IFAC’s more than 170 members in more than 130 countries, which together represent more than 3 million professional accountants. Since ICAI joined the IFAC family in 1977, ICAI members have served with distinction on the IFAC Board, its committees, and the international standard-setting boards that IFAC supports.
I want to acknowledge the service and leadership of several of your members:
- IESBA member Sanjiv Kumar Chaudhary
- My IFAC Colleague Kumar Raghu
- My IFAC Colleague and past CAPA president Manoj Fadnis
- My IFAC Colleague Naveen Gupta
- My IFAC Colleague, and your former president and Chair of the Executive Committee of the World Congress of Accountants 2022 Prafulla Chhajed
Thank you all for your commitment to the profession.
Now to turn to the topic at hand:
We know that COVID-19 is turning the world upside-down, but as a profession we can—and must—work to provide the essential services we need to bring to the global economy and civil society.
This conference, with the impressive lineup of speakers you have invited from around the world, is exactly the kind of engagement the profession needs right now. This crisis is worldwide; we are all facing the same problems, and we all need solutions.
The author of Sapiens, Yuval Noah Harari, predicted that after the storm passes, we will inhabit a different world. We may not be sure what kind of the world we are going to face, but this different world will include:
- More digital communications rather than in-person contacts.
- More environmental and public health protection.
On the other hand, the current business environments is being severely disrupted. As the result of lockdowns everywhere, closed borders are disrupting business locally and internationally, we have found that global economic cooperation is easily disrupted by the closed factories in affected regions.
This phenomenon has caused supply chain problems for global production lines from platform companies to local suppliers. Due to a severe lack of business transactions, a cash shortage and a dramatic decrease in profits awaits almost every business.
These companies, especially small- and medium-sized entities (SMEs), do not have enough cash to endure the several months during which there will be no sales. These types of businesses will soon face extreme liquidity problems with the distinct possibility of them becoming bankrupt.
This phenomenon threatens to be common across the world and hits SMEs and small- and medium-sized practices (SMPs) hardest.
Governments, societies, businesses, professionals, and every sector of society are making their best endeavors to stall this appalling chain reaction and restore the economy back to normal. Our profession, of course, should do its best to contribute to this endeavor.
As we can see in IFAC’s Vision, our profession is set to be essential to strong, sustainable organizations, financial markets, and economies.
Our profession must join the efforts in restoring the economy back to normal through persistent enhancement of the relevance and transparency of the business reports for decision makers and key stakeholders.
It is noted that in the US, the SEC released a public statement regarding the importance of disclosures related to COVID-19, particularly forward-looking disclosures to provide investors and the markets with information necessary to make informed decisions.
Integrated reporting can be an efficient and effective tool to communicate an entity’s strategies for the future to key stakeholders. But it becomes an even bigger challenge to prepare an integrated reporting under the current disruptive circumstances.
In addition to this, I would like to offer a few thoughts on how to handle what we have already seen, and how to prepare for challenges on the horizon.
Some challenges we are now facing.
We can see many things coming to our profession.
For organizations facing deadlines for reporting, for example, the loss of time and the restrictions of physical distancing will affect the ability of auditors, preparers, and issuers to do their jobs and report their findings promptly.
Our list of challenges is formidable and the uncertainty around them is significant.
- How will we respond to physical disruptions not only in our clients’ operations, but also our own?
- What if audit evidence available during this crisis is simply too little or too weak to inform an audit opinion in time for legal deadlines?
- How will asset devaluation affect the viability of countless businesses, and raise questions around Going Concern status?
- How will we deal with legal and contractual non-compliance as supply chains crumble and cash flows dry up?
- How will professional accountants meet their continuing professional development (CPD) requirements?
- What should we do to promote the well-being of individual professional accountants?
- And how do we handle the onboarding of new hires?
These are just a few of the many enormous questions we must answer. These questions are way more relevant to SMEs and SMPs.
The many insights of the contributors to our discussion today will help the accountancy profession learn, focus, and adapt. But we should not expect to solve all of our problems today. We will have to live with uncertainty about this virus—maybe for a long time.
We are used to the idea that change is coming.
The urgency and scale of the COVID-19 crisis is exceptional, but for professional accountants, the necessity of growth and adaptation is not. Fundamentally, our goals have not changed. A financial statement is still a financial statement, and an audit is still an audit. However, many of the ways we achieve them will change.
The imperative for all of us is creativity and flexibility. Using digital tools is a good place to start. Inventory observation, for example, cannot proceed in-person when lockdown orders keep auditors from visiting their clients. But some auditors might be able to video conference into their clients’ facilities to check inventory remotely.
Of course, this example that I have just raised is quite narrow compared to the broader issues we must consider. There might be dead-ends—things we find we cannot do right now, and that must be postponed.
These will be important issues to define and raise with clients and with regulators as soon as possible, as they will substantially affect audit opinions.
IFAC is working with firms, member organizations, and all others in the IFAC network to address these points.
This effort will be easier if we are all in it together, which brings me to my next point.
We must learn from each other.
Many organizations are publishing material about reporting and assurance services during the COVID-19 crisis. I commend ICAI for being a leader among them.
Your piece, “The Impact of Coronavirus on Financial Reporting and the Auditors Consideration,” for example, is a remarkably thorough and helpful document, both for its specific guidance to Indian professional accountants, and for its general comments on the impact of COVID-19 on reporting and assurance.
We have posted a link to that piece on IFAC’s dedicated COVID-19 resources page.
We have found thought guidance from all over our network, including many content hubs hosted by member organizations with an outstanding breadth and depth of information. We see that SMPs and their SME clients are especially vulnerable to the financial and practical consequences of this crisis. As the profession is rallying to provide solutions and guides to navigating this crisis, we aim to get this information to SMPs and SMEs that might need it.
We recently updated the site to include online CPD opportunities shared by our member organizations that are being made available to each other, including ICAI’s.
The World Bank and some large firms have cited this IFAC initiative as a valuable platform. The material we have curated is a true testament of the profession coming together for the common good and in the public interest.
I encourage everyone, especially SMPs, to visit our page, and to explore what the accountancy profession is seeing and saying during this crisis.
IFAC is working to facilitate the exchange of ideas. Thank you for being partners in that exchange.
I would like to emphasize that we can learn from each other’s best practices.
ICAI has led by example with its digitalization of member and student services. This digital transition will be crucial for all PAOs in the immediate future.
We must learn from each other and collaborate with each other to cope with this unprecedented situation and lead all efforts to ensure a better future.
IFAC as the global accountancy profession is in the best position to facilitate this collaboration across the world. The COVID-19 resources page is a good example.
Ladies and gentlemen, I would like to emphasize two things.
- The digitalization in our daily life will proceed at a much faster speed.
- The world will become even closer and more cooperative rather than separated and isolated through our collaborative efforts in coping with the coronavirus across the globe.
No one knows when this global health emergency will subside. But in the meantime, as professional accountants we must carry on and keep sight of our goals. Our work in the public interest is more important now than ever.
It has been a great pleasure to join your conference today. I would like to wish you well.