The regulator for the accounting profession, the Institute of Chartered Accountants of India (ICAI), on Friday issued an accounting and auditing advisory, with guidance on incorporating the impact of disruptions caused by COVID-19 on financial reporting and auditing.
The note provides guidance to companies and auditors on measuring impairment of assets, evaluating contingent liabilities and the ability of business to remain operational. Experts said the advisory was timely and that auditors would have a major role to play in evaluating the going concern status of companies in the current scenario.
“There is a need to advise the preparers of financial statements to ensure that the potential impact of COVID-19 is suitably considered in preparing and reporting their financial statements for the year ended March 31, 2020,” said the guidance note.
The guidance note has also called on companies to evaluate whether they will be able to continue as a going concern.
“In the current scenario, while making this (going concern) assessment, management would generally be expected to prepare detailed forecasts which will require regular updation till the financial statements are authorised for issue,” the guidance noted.
“Those preparing and auditing accounts will have a major role to play in evaluating various aspects including revenue recognition, valuation of financial instruments and assessing going concern assumptions, in discussions with the management,” said Kaushal Kishore, partner at accounting firm BSR & Co.