Auditor’s Reporting Key Audit Considerations amid COVID-19 Auditing and Assurance Standards Board (AASB) The Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
AuditingandAssuranceStandardsBoard(AASB)TheInstituteofCharteredAccountantsofIndia
Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
Composition of AASB
CA. G. Sekar,
Chairman, AASB
CA. (Dr.) Debashis Mitra,
Vice Chairman, AASB
CA. Atul Kumar Gupta,
President, ICAI
CA. Nihar Niranjan Jambusaria,
Vice-President, ICAI
CA. Anil Satyanarayan Bhandari
CA. Chandrashekhar Vasant Chitale
CA. Nandkishore Chidamber Hegde
CA. Shriniwas Yeshwant Joshi
CA. Durgesh Kumar Kabra
CA. Aniket Sunil Talati
CA. Dayaniwas Sharma
CA. M.P. Vijay Kumar
CA. Ranjeet Kumar Agarwal
CA. Manu Agrawal
CA. Anuj Goyal
CA. Kemisha Soni
CA. Satish Kumar Gupta
CA. Prakash Sharma
CA. Hans Raj Chugh
CA. Pramod Jain
CA. Charanjot Singh Nanda
CA. (Dr.) Sanjeev Kumar Singhal
Ms. Ritika Bhatia
Adv. Vijay Kumar Jhalani
Council Members
Co-opted Members
CA. Jaideep Bhargava
CA. R S Balaji
CA. Rahul Joglekar
CA. Kshitij Manubhai Patel
CA. Amit Gattani
CA. Kedar Kumbhojkar
CA. Kailash Chandra Baheti
CA. Ramakant Gupta
Special Invitees
CA. Jeenendra Bhandari
Dr. Padmini Srinivasan
Dr. Ashok Haldia
Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
Acknowledgement
CA.(Dr.)DebashisMitraViceChairmanAuditingandAssuranceStandardsBoard
CA.G.SekarChairman
AuditingandAssuranceStandardsBoard
WewishtoexpressoursincerethankstoCA.AtulKumarGupta,HonourablePresident,
ICAI and CA. Nihar Niranjan Jambusaria, Honourable Vice-President, ICAI for
providing us the opportunity to develop this Auditing Guidance on “Auditor’s
Reporting–KeyAuditConsiderationsamidCOVID-19”forthebene�itofthemembers.
We express our gratitude to theBoardmembers for their valuable suggestions in
�inalizingthisGuidance.
Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
Other Auditing Guidance on COVID-19 issued by AASB
March27,2020:ICAIAccountingandAuditingAdvisory-ImpactofCoronaviruson
FinancialReportingandtheAuditorsConsideration(issuedjointlywithAccounting
StandardsBoardofICAI).
WebsiteLink:https://resource.cdn.icai.org/58829icai47941.pdf
May10,2020:GoingConcern-KeyConsiderationsforAuditorsamidCOVID-19.
WebsiteLink:https://resource.cdn.icai.org/59473aasb48392.pdf
May13,2020:PhysicalInventoryVeri�ication–KeyAuditConsiderationsamid
COVID-19.
WebsiteLink:https://resource.cdn.icai.org/59498aasb48418.pdf
Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
Theauditor’sresponsibilityforforminganopiniononthe�inancialstatementsisdealt
withinSA700(Revised),“ForminganOpinionandReportingonFinancialStatements”.
SA 700(Revised) deals with unmodi�ied auditor’s opinion. SA 705(Revised),
“Modi�ications to theOpinion in the IndependentAuditor’sReport”dealswith the
auditor’s responsibility to issue an appropriate report in circumstances when, in
forminganopinioninaccordancewithSA700(Revised),theauditorconcludesthata
modi�ication to the auditor’s opinion on the �inancial statements is necessary. SA
705(Revised)requiresthatiftheauditor:
concludesthat,basedontheauditevidenceobtained,the�inancialstatementsasa
wholearenotfreefrommaterialmisstatement;or
is unable to obtain suf�icient appropriate audit evidence to conclude that the
�inancialstatementsasawholearefreefrommaterialmisstatement,theauditor
shallmodifytheopinionintheauditor’sreport.
This responsibility isheightened in thepresent situation,whereCOVID-19and its
related preventive measures, such as lockdown and travel restrictions by the
GovernmentofIndiahaveimpactonbusinessoperations.
Management’sResponsibility
While preparing the �inancial statements,
consideringthenatureofbusinessoftheentity,
the management needs to make a detailed
assessment(totheextentpossiblebasedonthe
informationavailable)oftheimpactofCOVID-
19 on the items, components of the �inancial
statementsincludingdisclosuresinthe�inancial
statements(e.g.appropriatenessofcarryingvaluesofgoodwillandotherintangible
Background
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
assets,fairvaluation,impairmentofassetsetc.)andtheappropriatenessofthegoing
concernbasisofaccounting.
Themanagement’s responsibility includesmaking appropriate adjustments to the
�inancial statements and ensuring necessary disclosures, such as disclosures of
subsequentevents,risksanduncertainties,andhoweventsandconditionsmayimpact
future operating results, cash �lows and �inancial position of the entity. Other
disclosures may include business risk factors and management's discussion and
analysisofresults,liquidityandcapitalresources.Inthiscontext,theauditorshould
alsoconsidertherequirementsofSA720(Revised),“TheAuditor’sResponsibilities
RelatingtoOtherInformation”.
Itispossibleforthemanagementofanentitycarryingonthebusinessofessential
commodities to conclude that there is no impact on the operations of the entity.
However, the management should also consider the related factors, such as the
possibledisruptionofthesupplychain,availabilityofcustomersforitscommodities,
andtakeaninformeddecisiononwhetheritsoperationsareimpactedornot.
Auditor’sResponsibility
Whilecarryingoutauditinaccordancewith
the StandardsonAuditing (SAs) andother
applicable authoritative pronouncements
issued by the Institute of Chartered
Accountants of India, the auditor may
concludeonthefollowing:
Modi�icationtotheauditor’sopiniondue
tomaterialmisstatementsoraninability
toobtainsuf�icientappropriateauditevidence[SA705(Revised)].
Inclusion of a ‘Material Uncertainty Related to Going Concern’ section in the
auditor’sreport[SA570(Revised),GoingConcern].
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
InclusionofanEmphasisofMatterparagraphand/orOtherMatterparagraphin
theauditor’sreport[SA706(Revised),EmphasisofMatterParagraphsandOther
MatterParagraphsintheIndependentAuditor’sReport].
Inclusionofkeyauditmattersintheauditor’sreport[SA701,CommunicatingKey
AuditMattersintheIndependentAuditor’sReport].
Whileconsideringtheauditor’sreportinginrespectoftheimpactofCOVID-19onthe
�inancialstatementsofanentity,theauditorshouldconsiderwhethersuf�icientand
appropriateauditevidenceisavailablefortheauditortobeabletoassessthefactors
setoutbelow.Thesefactorsareindicativeandnotexhaustiveandtheauditorshould
alwaysmaintainprofessionalskepticismandapplyprofessionaljudgmentonacaseto
casebasisandconsiderotherfactorsasapplicable.
whethertheimpactonthebusinessoperations/revenues/cash�lowsetc.ofthe
entityfortheyear(includingfairvaluations,estimates,realisability,discountrates
usedetc.)hasbeenappropriatelyassessedbythemanagement.
whethertheeventsoccurringsubsequenttotheyear-endbutbeforeissuanceofthe
auditor’sreport,havebeenconsidered.
whetheranyadjustmentsarerequiredtothe�inancialstatements;ifyes,whether
thesamehavebeenappropriatelyaccountedfor.
whether the impact on the going concern basis of accounting of the �inancial
statementshasbeenassessed to concludeon (a)appropriatenessof theuseof
goingconcernbasisofaccounting,and(b)existenceofmaterialuncertaintyrelated
togoingconcern.
whether appropriate disclosures have been made in the �inancial statements
regardingtheimpactandthemanagement’sassessmentofthesameincludingthe
impactongoingconcernbasisofaccounting.
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
ThepossibleimpactofCOVID-19ontheauditor’sreportisdiscussedbelow.
a. Modi�icationoftheAuditor’sOpinion[SA705(Revised)]
Theauditorshouldmodifyhisopiniononthe�inancialstatementsinthefollowing
circumstances:
Improper accounting/ inadequate disclosures: Auditors should remain
alerttothepossibilitythat,inthecurrentcircumstances,misstatementsmay
occur.Suchmisstatementsmayarise,forexample,duetoafailuretorecognise
adequateimpairmentofassetsoradequateprovisionsforobligationsorto
provide related disclosures. When the auditor has concluded that the
necessaryaccountingadjustmentshavenotbeenappropriatelymadeand/or
thedisclosures in the �inancial statements that themanagementhasmade
regarding the impact of COVID-19 on the entity are not adequate or
appropriateinthecircumstances,theauditor’sopinionmaybemodi�ied.The
saidmodi�icationcouldbeaquali�iedoradverseopinion,asappropriateinthe
circumstancesdependingonthematerialityandpervasivenessoftheimpact
[SA705(Revised),paragraphs7,8].Forexample,theconsequencesofCOVID-
19 may have a potential adverse impact on cash �lows and trigger an
impairment test; however the management has not carried out such an
assessment or has not made appropriate disclosures in respect of the
underlyingassumptions.
Inabilitytoobtainsuf�icientappropriateauditevidence:Amodi�icationto
theauditor’sopinion(quali�icationordisclaimerofopinion,asappropriatein
thecircumstances) isnecessary if theauditor isunable toobtainsuf�icient
appropriate audit evidence to conclude that the �inancial statements as a
wholearefreefrommaterialmisstatement[SA705(Revised),paragraphs7,9].
I. Impact on Auditor’s Report
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
If theauditordetermines thathe isunable toobtainsuf�icientappropriate
auditevidencefromalternativeauditprocedurespossiblyduetolockdown,
social distancing or work from home restrictions, it may affect auditor’s
opinionon the �inancial statements, auditor’sopinionon internal �inancial
controlsandauditor’sreportingonCARO2016.
b. GoingConcernConsiderations[SA570(Revised)]
Formanyentities,themeasurestakenbyGovernmentinordertocurbthespread
ofCOVID-19,suchaslockdownrestrictionsmayimpactthebusinessoperations
andresultineventsorconditionsthatmaycastsigni�icantdoubtontheentity’s
ability to continue as a going concern. When such events or conditions are
identi�ied, the auditor should seek suf�icient appropriate audit evidence to
determinewhetherornotamaterialuncertaintyexistsandalsoassesswhether
theuseofgoingconcernbasisofaccountingisappropriateandreportaccordingly.
Fordetailedguidanceonthisaspect,pleaserefertheguidance:“GoingConcern-
Key Considerations for Auditors amid COVID-19” issued by the Auditing and
AssuranceStandardsBoardofICAI.
c. IncludinganEmphasisofMatterParagraphintheAuditor’sReport
AsperSA706(Revised),theterm“EmphasisofMatterParagraph”isde�inedas
follows:
“EmphasisofMatterparagraph–Aparagraphincludedintheauditor’sreport
thatreferstoamatterappropriatelypresentedordisclosedinthe�inancial
statements that, in the auditor’s judgment, is of such importance that it is
fundamentaltousers’understandingofthe�inancialstatements.”
Where there are substantive COVID-19 related disclosures in the �inancial
statementsmadebythemanagementoftheentityandtheauditorissatis�ied
that these disclosures are appropriate and adequate, then based on the
professionaljudgmentoftheauditor,anEmphasisofMatter(EOM)paragraph
maybeincludedintheauditor’sreport.AnEOMparagraphisawaytodraw
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
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attention/highlightsuchdisclosurestousersofthe�inancialstatementswhen
theauditorconsidersitisfundamentaltotheirunderstandingofthe�inancial
statements.AnEOMparagraphcannotbeusedasasubstituteforreportingthe
matterasakeyauditmatter.
ExampleofEOMwordingsforauditor’sreport
“Emphasisofmatter–EffectsofCOVID-19
WedrawattentiontoNoteX inthe �inancialstatements,whichdescribesthe
economicandsocial[consequences/disruption]theentityisfacingasaresultof
COVID-19 which is impacting [supply chains / consumer demand/ �inancial
markets/commodityprices/personnelavailableforworkandorbeingableto
accessof�ices].Ouropinionisnotmodi�iedinrespectofthismatter.”
OnthebasisofitsassessmentoftheimpactoftheoutbreakofCOVID-19on
businessoperationsoftheentity,theentity’smanagementmayconcludethat
noadjustmentsarerequiredinthe�inancialstatementsasitdoesnotimpact
the current �inancial year. However, the situation with COVID-19 is still
evolving. Also, the various preventive measures taken (such as lockdown
restrictionsby theGovernmentof India, travel restrictionsetc.) are still in
force, leading to a highly uncertain economic environment. Due to these
circumstances,themanagement’sassessmentoftheimpactonthesubsequent
periodisdependentuponthecircumstancesastheyevolve;andconsequently,
the auditor shall decide on the adequacy of disclosures made by the
managementandifdisclosuresareadequate,theauditormayincludeanEOM
paragraphtohighlighttheuncertaintiesrelatingtothefutureandtodrawthe
attention of the users of the �inancial statements. [paragraph A5 of SA
706(Revised)]
AsstatedinparagraphA5ofSA706(Revised),theauditormayincludeanEOM
paragraphinthefollowingsituationswhileassessingtheimpactofCOVID-19
ontheentityandtheimpactonthe�inancialstatements:
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
Anuncertaintyrelatingtothefutureoutcomeofexceptional litigationor
regulatoryaction.
Asigni�icantsubsequenteventthatoccursbetweenthedateofthe�inancial
statementsandthedateoftheauditor’sreport.
Amajorcatastrophethathashad,orcontinuestohave,asigni�icanteffecton
theentity’s�inancialposition.
Forexample,theauditorshouldassesstheimpactofCOVID-19onaviation,
hospitalityindustries,etc.
Thedictionarymeaningoftheword“catastrophe”is“aneventcausinggreat
andusuallysuddendamageorsuffering;adisaster”.TheimpactofCOVID-19
should be assessed by the auditor and the auditor may include an EOM
paragraphinthesituationsindicatedaboveintheauditor’sreport.Further,the
auditormayincludeanEOMparagraphtohighlightasigni�icantsubsequent
event. It is highlighted that such EOM paragraph shall be included by the
auditor only when all related disclosures are appropriately made by the
management. Otherwise, it could even lead to modi�ication of auditor’s
opinionasperSA705(Revised).
d. COVID-19andKeyAuditMatters
AcommonquestionthatisbeingaskediswhethertheimpactofCOVID-19isa
keyauditmatter(KAM)inanauditperse.TheimpactofCOVID-19onspeci�ic
areas of the �inancial statements needs to be evaluated for thepurpose of
reporting KAM. For example, physical veri�ication of inventory using
alternativeauditproceduresmayinvolvemoreeffortvis-a-visanon-COVID-19
scenario. Similarly, the auditorwouldbemore skeptical about impairment
assessmentincurrentscenario.Further,itshouldbenotedthattheauditoris
notperformingprocedurestoassesstheimpactofCOVID-19itselfratherthe
procedures are being performed in respect of speci�ic items of �inancial
statementsorassumptions(forexamplegoingconcern,impairment,expected
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
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credit loss,valuationetc.)and thus thatparticular item/assumptionwould
qualifytobeaKAM,wherethecriteriasetoutinSA701aremet.
Whendrafting theKAM in theauditor’s report, theauditor shouldnotuse
generic/vaguelanguageandshoulduseentityspeci�ic&clearlyarticulated
languagetoexplaintheimpactofCOVID-19.LanguageofKAMshouldbringout
clearlythecomplexitiesarisingfromCOVID-19ontheveri�icationaspectsof
the�inancialstatements.Lastly,amattershouldbeconsideredforinclusionas
KAM only when the auditor has concluded that it does not warrant
modi�icationof theauditor’sopinionandalsodoesnot indicateamaterial
uncertaintyrelatedtogoingconcern.
Insomecases,amatterthathasbeendeterminedtobeaKAMinaccordance
withSA701mayalsobe, in theauditor’s judgment, fundamental tousers’
understandingofthe�inancialstatements(i.e.,couldalsobereportedasan
EOMparagraph).WhentheauditordeterminesthatthematterisaKAM,the
auditorshouldincludeitintheKAMsectionoftheauditor’sreport.However,if
theauditorwishestohighlightordrawfurtherattentiontotheKAM(because
the KAM is also considered fundamental to users’ understanding of the
�inancialstatements),theauditormaydosobypresentingthemattermore
prominently than other matters in the key audit matters section of the
auditor’s report (e.g., as the �irst matter) or by including additional
information in the description of the key audit matter to indicate the
importanceofthemattertousers’understandingofthe�inancialstatements.
e. KAMRelatedtoGoingConcern
ItispossibletoidentifyKAMrelatedtogoingconcernmatters,whichwouldbe
reportedintheKAMsectionoftheauditor’sreport,whentheauditor:
Identi�ieseventsandconditionsthatmaycastsigni�icantdoubtonanentity’s
abilitytocontinueasagoingconcern;and
Concludesthatnomaterialuncertaintyexists;and
Concludes that the disclosures related to those events or conditions are
adequate.
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
In such cases, the auditor shoulddescribe the identi�ied eventsor conditions
disclosedinthe�inancialstatementsthatwerethefocusoftheauditor’sattention,
suchassubstantialoperatinglosses,availableborrowingfacilitiesandpossible
debtre�inancing,ornon-compliancewithloanagreements,andrelatedmitigating
factorsinaccordancewithSA701.
f. Auditor’s Responsibilities in respect of Discussion about the COVID-19
PandemicincludedintheOtherInformationintheEntity’sAnnualReport
Otherinformationthataccompaniesthe�inancialstatementsmaybeexpectedto
include discussion on the risks associated with the COVID-19 pandemic that
provides entity’s additional perspectives or details beyond the information
disclosedinthe�inancialstatements.AsrequiredbySA720(Revised),theauditor
should read the other information included in the entity’s annual report and
considerwhetherthereisamaterialinconsistencybetweentheotherinformation
and (a) the audited �inancial statements; and (b) the auditor’s knowledge
obtainedintheaudit,inthecontextofauditevidenceobtainedandconclusions
reached.
Whenreadingtheotherinformation,theauditorshouldpayparticularattention
totheinformationprovidedwithregardtotheimpactCOVID-19mayhaveonthe
entityandconsiderwhetherthereisneworupdatedinformationthatshouldbe
disclosedinthe�inancialstatementsorthatmayaffecttheauditortheauditor’s
report. In doing so, the auditor should also consider whether the other
informationcontradictsanyaspectsoftheauditor’sunderstandingoftheimpact
thepandemichasontheentity’sbusinessoroperations.
When the other information ismade available after the date of the auditor’s
report,theauditorisalsorequiredtoreadandconsidertheotherinformation
whenitbecomesavailable.
If theauditor identi�iesamaterialmisstatement in theother information, the
auditorshouldassesstheeffectontheauditor’sreportandtodealwiththesame
inaccordancewithSA720(Revised).
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
WiththeCompanies(Auditor'sReport)Order,2020,beingmadeapplicablefrom
the�inancialyear2020-2021,whilereportingforthe�inancialyear2019-2020,
auditorsshouldcontinuetocommentonthematterssetoutintheCompanies
(Auditor’sReport)Order,2016(CARO2016).
AnillustrativelistoftheclausesofCARO
2016whichareexpectedtobeimpacted
byCOVID-19,astheauditorisrequired
tocommentasattheyear-end,isgiven
below.
a. Clause3(ii):Physicalveri�icationofinventory
Remarks:Thisclauserequirestheauditortocommentwhethertheinventoryof
the company have been physically veri�ied by themanagement at reasonable
intervals and further requires the auditor to comment whether anymaterial
discrepancies were noticed on such veri�ication and if so, whether those
discrepancieshavebeenproperlydealtwithinthebooksofaccount.
Inthisregard,wheretheauditorisunabletoobtainsuf�icientappropriateaudit
evidence,thecommentingonthisclause,andwhereappropriate,theauditor’s
opinionshouldalsobesuitablymodi�ied.
b. Clause3(vii)(a):Reportingondepositofundisputedstatutorydues
Remarks: This clause requires reporting on the payment of statutory dues
includingtheextentofarrearsasonthelastdayofthe�inancialyear.
Consideringthatthelastdayofthe�inancialyear2019-20fellduringthelockout
period,andextensionoftimeisbeinggrantedforpaymentofcertainduesbythe
Governmentauthorities/regulators, thecommenting inrespectof thisclause
II. Impact on Reporting under CARO 2016
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
shouldre�lectthefactualpositionregardingtheextensionofdategrantedbythe
relevantauthoritiesforpaymentofsuchdues.Further,wherethecompanyhas
madethepaymentwithinsuchextendedduedates,itdoesnotconstituteanon-
complianceandaccordinglywillnotberequiredtobereportedunderthisclause.
However,ifthereisnoextensionofduedateandanoptionhasbeengiventomake
payments at a later date upon payment of interest and penalty, it should be
reportedasdefault.
c. Clause3(viii):Default in repaymentof loansorborrowing toa �inancial
institution,bank,Governmentorduestodebentureholders
Remarks: RBI has issued a circular dated 27th March 2020 on COVID-19-
RegulatoryPackage.Thecircularprovidesthatcompaniesmaydecidetooptfora
moratorium period for repayment of term loans / working capital �inancing
facilitiesetc.,howeverinterestwouldcontinuetobechargedforthisperiod.
Wherethecompanyhasexercisedthisoption,theauditorshouldmakeafactual
statement in his report. Further,where the company hasmade the payment
within such extended due dates, it does not constitute a non-compliance and
accordinglyisnotrequiredtobereportedunderthisclause.
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
Auditor’sReportingKeyAuditConsiderationsamidCOVID-19
Section143(3)(i)oftheCompaniesAct,2013requiresthattheauditor’sreport
shouldstatewhetherthecompanyhasadequateinternal�inancialcontrolswith
referenceto�inancialstatementsinplaceandtheoperatingeffectivenessofsuch
controls.Also,internalcontroltestingisanintegralpartofauditprocedures,as
this determines the level of substantive procedures to be carried out by the
auditor.
Keyfactorstobeconsideredwhileapproachingtheaudit:
a. Non-remediationofmaterialweaknessnoticedduringtheperiodforwhich
internalcontroltestinghadalreadybeencarriedout.
b. Make inquiries on the change in the company’s mode of carrying out
operationsinresponsetotheCOVID-19impact,forexample,peopleworking
remotely,andconsequently,thechangeincompany’spoliciesandprocedures,
includingexecutionofcontrols,forexample,segregationofduties.
c. Speci�icmatters for consideration: The impact of changes to the auditor’s
understandingofthecompany’ssystemofinternalcontrol,including:
i.Thecontrolenvironment.
ii. Changestotheplannedrelianceoncontrolsindeterminingresponsesto
identi�iedrisksofmaterialmisstatement.
d. Rewriting the audit plan to address the changes in the internal control
framework,includingthoserelatingtothedesignandoperationofinternal
controlsandreviewcontrols.
e. Testing the design and operating effectiveness of the updated controls
frameworkincludingthesegregationofdutiesinlinewiththerequirements
setout in the “GuidanceNoteonAudit of InternalFinancialControlsover
FinancialReporting”withthehelpoftherelatedexperts.
III. Impact on Reporting on Internal Financial Controls with Reference to Financial Statements
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
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f. Evaluatingtheavailabilityofelectronicanddigitalevidencemadeavailableby
management, and the review controls around the same, speci�ically for
reliability,securityandstorageofsuchevidence.
g. Remainalerttothepossibilityoflapseofcontrolsandfraud.
h. Communicationwith those chargedwith governance at every stage of the
auditincludingtheimplicationsontheauditofthe�inancialstatementsand
thereportingthereon.
ReportingonInternalFinancialControlswithreferencetoFinancialStatements
Thefollowingscenariosareenvisaged:
a. Main audit opinion is notmodi�ied; Emphasis of Matter paragraph has been
includedtohighlightimpactofCOVID-19assessment;theauditorhasconsidered
thekeyfactorsmentionedaboveintestingthedesignandoperatingeffectiveness
oftheinternalcontrolswithreferenceto�inancialstatements,and:
i. Materialweaknessisidenti�iedinthedesignoroperationofinternalcontrols
[and/or] the material weakness identi�ied earlier remains unremediated
[and/or]thereisarestrictiononthescopeoftheengagement.
Insuchcases,theauditorshouldmodifyhisopinionontheinternal�inancial
controls;evaluatetheimpactofsuchmodi�icationonthemainauditreport
andasappropriate,modifytheauditor’sopiniononthe�inancialstatementsas
well.
ii. Noconcernshavebeennotedbytheauditorwithregardtothedesignand
operatingeffectivenessofinternalcontrols:
Underthesecircumstances,theauditorshouldincludeacrossreferenceinthe
opiniononinternal�inancialcontrolstotheEmphasisofMatterparagraph
includedinthemainauditreportwithregardtoCOVID-19assessment.
b. Wherethemainauditopinionismodi�iedinrespectofanymatter(includingthat
relating toCOVID-19); the auditor should evaluate thekey factorsmentioned
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
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above,anddeterminewhetherthemodi�icationalsoleadstoamodi�icationofthe
reportoninternal�inancialcontrolsandwhereapplicable,modifythereporton
internal�inancialcontrolsaccordingly.
c. Wheretheauditor isunabletoobtainsuf�icientappropriateauditevidenceto
formanopiniononthedesignandoperatingeffectivenessofinternal�inancial
controls with reference to �inancial statements, the auditor should issue a
disclaimerofopinion.
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Auditing and Assurance Standards Board (AASB) �e Institute of Chartered Accountants of India
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NOTES