According to a review by the Financial Reporting Council (FRC) covering the going concern policies and procedures of the seven largest UK audit firms, the additional policies and procedures introduced were appropriate and reasonably consistent across the firms.  
 
Audit firms have increased the extent of required consultations and central guidance for audit teams, and have had regular communications with them, to ensure consistency in the audit of going concern.

These additional measures also increased the level of challenge to company boards and management about their key assumptions, stress testing and disclosures in the financial statements.
 
Boards are responsible for assessing whether a company is a going concern and whether any material uncertainties to going concern exist. Going concern assessments have become significantly more difficult for many companies and their auditors, given the uncertainties about the impact of the coronavirus, the extent and duration of social distancing measures and the impact on the economy.
                                           
David Rule, executive director of supervision at the FCA, said: “The pervasive and uncertain impact of Covid-19 has made assessing whether companies have a material uncertainty to going concern much more difficult for many boards and their auditors.  No-one has a crystal ball, but investors do expect appropriate consideration and disclosure of uncertainties.  

“Our review found that audit firms have taken sensible steps to increase required consultations and offer more central support to audit teams. Audit procedures also need to be proportionate to the risks facing companies, which vary considerably depending on the impact of the pandemic on their businesses.”

• Read all of our articles relating to COVID-19 here.