Ask ICAS webinar 2: Coronavirus - Accounts, audit and cash as king
Some key takeaways from the second Ask ICAS webinar which covered accounts, audit and directors responsibilities.
This webinar, and the accompanying slides, are now available to view on-demand.
Accounting and audit considerations for private companies
James E Barbour CA, ICAS Director, Policy Leadership covered accounting and audit considerations for private companies.
- Key points on filing of accounts and financial reporting:
Companies House have introduced an automatic three month extension for the filing of company accounts which needs to be applied for.
- The reason for the extension should be the impact of COVID-19 on the company’s activities. Company Number is also required.
- Please note that this is only applicable where the filing deadline has not yet passed.
- Companies that have already extended their filing deadline, or shortened their accounting reference period, may not be eligible for an extension.
- A company’s year accounting reference period can be extended online.
- The FRC have issued recent guidance which highlights the following as key areas for companies to consider when preparing financial statements:
- Going concern and any associated material uncertainties, the basis of any significant judgements and the matters to consider when confirming the preparation of the financial statements on a going concern;
- The increased importance of providing information on significant judgements applied in the preparation of the financial statements, sources of estimation uncertainty and other assumptions made; and
- The judgements required in determining the appropriate reporting response to events after the reporting date and the extent to which qualitative or quantitative disclosures may be appropriate.
- FRC guidance for companies and auditors is now available.
Key points for auditors:
- The FRC March bulletin contains a non-exhaustive list of factors auditors should be considering when carrying out audit engagements in the current circumstances.
- Risk Assessment and planning – For audits which are underway relating to periods that end after 31 December 2019, the impact of COVID-19 is likely to require the auditor to revisit their risk assessment and the proposed response to identified risks.
- ICAS has produced guidance which provides examples of potential alternative audit procedures that auditors might perform in seeking to obtain sufficient and appropriate audit evidence in respect of inventories.
- FRC recognise that given the current uncertainty and volatility, that more companies and auditors may need to consider reporting on material uncertainties. Where they do so, this should draw on the available facts and circumstances. Auditors should not generically report on material uncertainties.
- Further guidance on the implications of COVID-19 on audits is likely to be issued.
Director responsibilities and keeping cash as king
Steven Wood, Practice Support Specialist (Insolvency), gave an overview of director responsibilities and keeping cash as king.
Key points on director responsibilities and the importance of cash
- In the pre-coronavirus business landscape, if a company was insolvent directors were under a duty to take every step a reasonably diligent person would take to minimise potential loss to the company's creditors.
- Failing that, they risked personal liability for any worsening of the company’s financial position - wrongful trading.
- Wrongful trading provisions suspended temporarily from 1 March 2020 for three months.
- To allow businesses to take advantage of government aid and enable otherwise viable businesses to weather the crisis.
- However, “all of the other checks and balances that help to ensure directors fulfil their duties properly will remain in force”.
- Directors must still ensure that they comply with their duties and act in the best interests of the company.
- Only the wrongful trading provisions are being relaxed.
- Cash remains vital to allow businesses to survive and allow those businesses forced into closure to get things up and running again.
- There are numerous government measures to support businesses.
- Daily cash-flow forecasting is vital, along with a detailed review of expenditure to establish what can be cut back on during any period of shutdown or business disruption.
Details of how to register for next week’s Ask ICAS webinar will be available soon.