Living with COVID 19 in the Accountancy world
The world has changed dramatically in recent months. At the beginning of 2020, many CPAs were excited about the panorama of an “easier” busy season. Financial markets were at an all-time high, and everything appeared to be smooth sailing.
Then laterally came COVID-19. The hospitality and travel industry has all but disappeared. Commerce has declined dramatically. Millions of Ugandans are under lockdown orders resulting in the need for owners and employees of CPA firms, and their clients, to work from home. Existing engagements for all areas of practice have been affected, and the new scenery also presents opportunities to help clients navigate these challenging times. While much of the world is focused on the immediate and direct impact of COVID-19, its indirect effects, such as the state of the economy or the services offered by CPA firms, have probable long-term professional liability consequences that should be addressed now.
- Audit services– Probabilities are, that previously completed engagement planning and risk assessment procedures did not address COVID-19 or the risk of a pandemic in general. New circumstances have arisen that necessitate a reassessment of, and likely, modifications to, a CPA firm’s planned approach.
Firms should consider the impact of COVID-19 on a client’s business, especially the impact on financial statement amounts that require judgment or estimation, such as asset valuations or revenue recognition. Additional disclosures, such as going concern and risks and uncertainties, or modifications to the CPA firm’s report may be necessary.
If both the client and engagement team are working remotely, how will evidence be gathered and tested? Assess engagement plans to determine if modifications are required in order to comply with professional standards. Discuss modifications with the client as the engagement fee or realization may also be impacted.
2. Tax services. Though filing deadlines and estimated tax payments have been extended for many types of tax returns, they have not been extended for all, resulting in a complex calendar of future filing dates that is in constant flux. Be watchful of due dates that have changed, and those that have not, and work with clients to file returns on time. If this is not synchronized properly, the client may fault the CPA for any late-filing penalties.
3. Consulting services. Consulting services, including tax consulting, may be modified, suspended, or even terminated to enable clients to conserve cash flow. If necessary, firms should secure updated engagement letters or other written communication with the client detailing any modifications to the scope. If services are temporarily halted or postponed, confirm this in writing with the client.
4. Existing engagement letters. Firms are encouraged to review existing engagement letters to ensure they continue to accurately mirror the agreement between the firm and the client.
5. Billing and collection activity. Downheartedly, many clients are struggling to continue paying invoices when due, including those to their CPA firm. Partners are required to review their clients’ lists to identify those that may have cash flow problems and probably discuss payment alternatives in order to continue providing services.
6. Empathizing with clients: Some clients have requested CPA firms to waive some fees or offer a discount on fees payable because they are cashflow constrained. At the moment, every entity is in survival mode and would like to manage its cashflows in the most frugal ways. It’s important to listen to clients and offer the much-needed help that can be affordable. Without doing this, there is a risk of losing clients. The saying goes, a friend in need…..
The COVID-19 outbreak is disrupting supply chains and affecting production and sales across a range of industries. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, and the impact on our customers, employees, and vendors all of which are uncertain and cannot be easily predicted. At this point, the extent to which COVID-19 may impact our financial condition or the results of operations is uncertain. Preliminary measures and business continuity plans to mitigate adverse impact are being activated and will be closely monitored and the Firms will continually assess them on an ongoing basis and adopt changes as events unfold.
This is a surprising time for the world, our country, and the profession. While the full impact of COVID-19 is unknown and uncertain, what is certain is the need for CPAs to be vigilant and informed and to be flexible, and adaptable in their response to these changing times.