U.S. auditors are taking steps to ensure that they can continuing working with their clients amid supply chain and staffing shortages related to the coronavirus overseas, and are dusting off contingency plans and urging staff to limit travel as a precaution.
The outbreak hit home this week for the accounting profession after a Deloitte LLP staffer in the U.K. was hospitalized with the coronavirus disease. The firm temporarily closed a floor in one of its London offices for “deep cleaning” after the diagnosis, and the space has since reopened to staff, Deloitte said.
So far, the market disruptions aren’t affecting the timing of audit work, said Steven Morrison, who leads CohnReznick LLP’s audit quality group.
But the U.S. firm is expecting to need to alter some audit and testing procedures because systems they would normally access or people who would normally answer auditors’ calls might not be available going forward, Morrison said.
U.S. audit firms generally wrapped up their work for annual reports filed in February—before the virus began to spread and quarantines were put in place in China. In comparison, the coronavirus outbreak delayed internal audit work and even board meetings in China, leading some Chinese companies to delay their annual reports.
Still, the outbreak’s unpredictability means that any guidance or best-laid plans could have to be changed at any time.
PwC LLP revised its travel guidance Tuesday, suspending non-essential work travel between the firm’s offices in the U.S. and internationally. Client meetings however, will continue, the firm said.
PricewaterhouseCoopers, Ernst & Young LLP, and KPMG LLP have all restricted travel to parts of the world hardest hit by the virus.
EY has limited nonessential international and U.S. travel and has asked staff to defer traveling to China, Hong Kong, Macao, Japan, South Korea, and parts of Northern Italy, the firm said.
The three firms have asked staff to stay home for 14 days after traveling to those locations. They have also urged their teams to use virtual meetings and other remote-work tools to limit the need for travel.
“We will continue to take a cautious approach to travel and health guidance for the safety of our people while continuing to fulfill our obligations to the capital markets,” PwC said in a statement. Discussions about the potential impacts to audits are ongoing.
Bracing for Disruption
In the meantime, firms are working with audit committees, preparers, and regulators to maintain consistent financial reporting and auditing despite rapidly changing health and market conditions, the Center for Audit Quality told Bloomberg Tax.
“We have protocols in place to provide high-quality client service in the face of significant disruptions,” Grant Thornton LLP said in a statement. Some of those backstops include shifting work among the firm’s U.S. offices.
The Securities and Exchange Commission said Wednesday it would grant a 45-day extension to companies that need more time to meet routine filing deadlines for annual and quarterly reports. Companies must explain, however, why they need the relief and when they expect to file.
That means public companies need to know about the timing of the audit and any changes that might interfere with the auditors’ work—whether for upcoming annual reports or the review of quarterly reports.
“Companies should make sure they have a very open and frank dialogue with their auditors,” said David Brown, partner in Alston & Bird LLP’s securities group.
—with assistance from Michael Kapoor.