In this Update: Dealing with Clients, COVID-19 Support; Standards Update; Reminder
Life continues to change. With the announcements of the province opening, we will slowly move into a “new normal”. I recently read that phrase is in competition for being the highest used phrase of the year – right up there with “flattening the curve”. It will be interesting to watch in the coming months what the new normal entails and how we adapt. Working remotely, social distancing, conducting client meetings, delivering training will all evolve as we settle in. In the meantime, the focus is, and always will be, the client and how we work with them in completing engagements and providing support. This month’s update includes information on things to think about as we move into our new normal. Read on…
5 Steps for Advising Clients
There is so much information to weed through these days, emergency funding options, new working environments, government guidelines, the list goes on. After dealing with the immediacy of your own operations, supporting clients is most likely one of your top priorities. An article from the Journal of Accountancy explores five strategies to navigate advisory, and sometimes difficult, conversations with your clients to help them cope. If there is ever a time when clients needed your guidance, expertise and care, it is now. The strategies are straightforward and may give you useful ideas to help manage through this time.
Areas of Focus Due to COVID-19
Global developments relating to the current situation have impacted the work of auditors. Uncertainty and unpredictability may create risks of material misstatement that are new or heightened. Auditors have to adjust how they obtain sufficient appropriate audit evidence on which to base the audit opinion amid the many challenges they are facing. IFAC has published an Alert that highlights many of the items that auditors need to focus on in a clear and concise manner. The publication refers to ISAs but Canadian auditing standards (CAS) are substantially the same so this is particularly good tool to help you assess risk and document your conclusions.
COVID-19 and Going Concern Impacts
Even though business may now be able to open, COVID-19 related event may cause a deterioration in an entity’s operating results and financial position, affecting its ability to continue as a going concern. An article from CPA Canada provides guidance on learning how to address the challenges that arise from these conditions. Whether the engagement is an audit or a review the issues are the same and must be considered.
Coping with Standards Changes
There have been some delays in the effective date for some US GAAP and IFRS standards. However, for all my research, I have seen no discussion on delays for any Canadian standards. That means throughout all this we still must be cognizant of upcoming new standards. Nothing is imminent but throughout this time we cannot forget about the future. It is a challenge to keep up. The Journal of Accountancy has tips on how to “stay the course” and deliver high quality engagements.
CPA Canada’s COVID-19 information page CPA CANADA COVID RESOURCE PAGE is a good resource for guidance on financial reporting and other issues. FRAS Canada also has an information page FRAS CANADA COVID RESOURCE PAGE although this one is a little more IFRS focussed.
I promise there will come a day when we are not talking about the pandemic and flattening the curve (although in my case, I am eating so much baking I feel like I am “fattening the curve”). In the meantime, whatever challenges you face, remember that I am here as a resource as needed. Feel free to reach out at any time. Take care and stay healthy.
Kirsten S. Albo, FCPA, FCA
In this Update: COVID-19 Support; Financial Reporting; Testing Inventory; Beneficial Ownership
Wow, the world has changed so much in the past month as we now try to figure out the new normal in these uncertain times. As I read through all the email updates, notices and social media posts, I was almost overwhelmed as there is so much information out there. While there are many changes – in how we work, how we interact with clients, extended deadlines – ironically, it is still business “as usual” for many as the work still needs to get done. This month’s topics focus on resources I believe will be helpful in addressing some of the issues you may be facing in getting that work done. Read on…
CPA Canada COVID-19 Resource Support
CPA Canada is committed to adapting and providing timely and relevant information to their members. They are trying to limit emails being sent out and rather are updating their website for relevant topics. They now have a CPA Canada has a COVID-19 resource page listing resources available to help respond to the challenges that now face us. The resources vary in their nature and their source and include publications from accounting firms, lawyers and lenders. Topics covered include crisis response strategies, cash flow management, corporate governance and protecting employees and work remote arrangements. There are many publications in the list that may be of interest to your firm directly or to your clients.
In response to the fact the majority of inquiries from members relate to tax issues, CPA Canada is offering a tax-focused webinar on April 3, 2020 that will address many of the recent announcements by the Federal Government. Topics will include enhanced wage subsidy and GST deferral among other topics. A great resource to more fully understand the current environment so you can in turn advise your clients.
Financial Statement Disclosure Considerations
Over the past week I have had many practitioners phone me to discuss financial statement disclosures for their clients. While I don’t expect to see wide-sweeping generic disclosures, I believe financial statement disclosures may be required for specific circumstances. Companies might scale back operations, have supply chain impacted, lose customers or shut down altogether in reaction to the uncertain times. Such matters as the going concern presumption, valuation of goodwill, impairment of assets, banking covenant requirements, onerous contract provisions and valuation of inventory are significant and require the use of professional judgement on the impact on the financial statements. Many of the larger firms have published articles on financial statement disclosures and after reading most of them, I feel that Deloitte’s is the most comprehensive and informative. While the article is IFRS related, there are many matters that may also be relevant for those companies using ASPE or ASNPO. Use this as the starting point to think about the specific disclosures needed for your clients. And consult where needed.
Testing Inventory Without a Site Visit
The current situation has made inventory testing a huge challenge for auditors, particularly for client entities with a March 31 year end. An article published by the Journal of Accountancy provides guidance on alternative procedures when one can’t attend an inventory count. A cautionary note, the article refers to standards in the US but many of the issues raised consistent with Canadian accounting standards for ASPE and ASNPO. Please feel free to reach out to discuss this issue further as you consider your auditing requirements related to inventory for your clients.
Beneficial Ownership Rules
In the line of business as usual, one change that may slip through the cracks is changes to the Canadian Business Corporations Act mandating the collection of beneficial ownership information, which came into effect in June 2019. The requirement is to track and record individuals who have significant control of the corporation. “Significant” has been deemed to be 25 % or more of the voting rights or 25% or more of the fair market value of shares. While this is a federal requirement, many provinces have taken steps to also make these changes. Manitoba enacted their rules which become effective April 8, 2020 with other provinces following suit. CPA Canada has written a good article on how CPAs can assist clients in meeting this requirement including building awareness, advising and sharing expertise. It is a worthwhile read to help your clients be prepared and meet the requirement which has a stiff penalty if not met. I have not heard of any delays or changes to this requirement.
You will note that I did not include any links on “tips on working from home” as these types of articles are plentiful. Nor did I include any articles on recent announcements from the government on such things as the Canadian Emergency Response Benefit or the enhanced wage subsidy (other than the link to the Webinar) as these articles are also abundant and it is important to go to the source that is most applicable to your clients. I believe that many small owner-managed companies will be relying on their accountants to help them understand or apply for these programs. It is a time when professionals are needed more than ever – I guess that is why the provincial government has stated that accountants are critical service providers and may remain open. Please feel free to reach out any time, I am here to assist you as you assist your clients.
Kirsten S. Albo, FCPA, FCA