COVID-19: Areas where auditors have to be alert

With the sudden changes in the auditing landscape, brought about by the situation with the COVID-19 virus and lockdown, a flurry of research papers, articles and social media posts are emerging with points of view on the areas requiring auditors’ additional attention. The following sheet summarises the latest accumulation of these areas, and may be used as a ‘cheat sheet’ to double check documentation and procedures.

Audit Field Focus Area
Asset valuations Useful lives, pattern of utilisation of economic value and their certainty
Audit report Emphasis of matter, qualification or disclaimer in extreme cases of uncertainty or scope limitation
Audit report consideration Consider an emphasis of matter paragraph in all reports, as the expectation is that directors communicate the effect of COVID-19, even if there is no effect
Business risk assessment process Business risks are expanding, owing to the virus, depending on the operations and circumstances. Deficient assessment of risks affects overall risk
Communication with those charged with governance Communicate changes in audit plan and risk assessment, time required to perform quality audit, and expectations of level of disclosure of COVID-19 impact in financial statements. Enquire regarding the means of access to information needed to perform the audit
Control testing Control testing may be difficult to perform during lockdown, due to restrictions in place, requiring an amended audit approach
COVID WP Draw up a separate working paper with all these considerations, with reference to supporting procedures, where applicable
Depreciation methods The pattern of use of economic value may have changed
Directors’ report Economic dependence
Disclosures Directors’ Report, completeness and accuracy of financial statement disclosures
Employee benefits Employee benefits, remuneration and terms of employment are being changed, or expected to be changed, in the future
Estimates Judgments made by management and their measure of uncertainty
Evidence The value of evidence is affected by not being able to physically verify evidence, and alternatives should be carefully assessed
Firm-level client risk assessment At firm level, client risk may increase, owing to, among others, going concern, management integrity (fraud), scope limitations, fair-value measurement and impairment considerations, subsequent events, non-compliance with laws and regulations, and the level of completeness and accuracy of disclosures, triggering a requirement for safeguards such as EQCR, or causing the auditor to reconsider client continuance
Forex rates Rate fluctuations cause an increased risk of using the incorrect rate, leading to a material error
Going concern Ask management to reassess, if they have performed assessment prior to COVID-19, and consider deferred tax balances and, especially, recoverability of debit balances
Group audits Consider whether it is more effective and efficient to perform audit procedures centrally by a group engagement team, instead of using component auditor and alternative procedures
Guarantee re-assessment Guarantees issued in the past may be amended, or new guarantees required
Impairments Recovery of economic value and its risk may have changed
Income tax relief Income tax relief measures may be incomplete, or incorrectly recognised
Internal controls not performed anymore Due to lockdown, certain internal controls may not function properly, or be amended
Inventory Counting procedures, alternative procedures and value of evidence
Lease accounting Classification and measurement of inputs to calculations
Liabilities Amendments to contracts, agreed upon or otherwise, need to be identified and the effect considered
Management representations Financial reporting assumes that management have considered the effect of the COVID-19 virus and lockdown on all aspects of their operations, and this needs to be confirmed by them
PPE Alternative procedures to verify and value of evidence
Professional scepticism Professional scepticism should be increased, due to the increased risk to all industries
Reportable irregularities Transgression of laws and regulations may be more attractive in the fight for survival. There are also laws and regulations specific to the lockdown
Share-based compensation Prevalence may increase, due to cash constraints, and its accounting at risk of being inaccurate
Subsequent events
  • Distinguishing adjusting and non-adjusting events. Consider facts relating to COVID-19 that became known to the auditor after the audit report date, which, had they been known at the audit report date, may have caused an amended audit report
  • In the event of the audit report not having been signed yet, consider disclosure of the COVID-19 events, with a possible emphasis of matter paragraph in the audit report.


Auditors have to ensure that audit procedures are adapted as necessary and audit documentation reflects the consideration of the effects of COVID-19. If you have any questions, or need assistance in this regard, you are welcome to contact LEAF for expert technical advice, thorough file reviews and practical guidance.


1. IRBA Newsletter: Implications of the COVID-19 outbreak on audits and auditors, 20 March 2020
2. IRBA COVID-19 Newsletter: The Impact of COVID-19 on the Auditor’s Report: Going Concern, 16 April 2020
3. SAICA Frequently Asked Questions: The impact of COVID-19 on audit considerations, April 2020

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