23 March 2020 - Now that the coronacrisis is also having enormous consequences in the Netherlands, there are also consequences for the content of the annual accounts (and the management report), the manner in which they are drawn up and the auditor's report issued on them. This note briefly mentions a few relevant topics in that context.
ANNUAL ACCOUNTS AND MANAGEMENT REPORT
For annual accounts relating to the calendar year 2019, the coronavirus will not lead to a different treatment and valuation of assets and liabilities. This is because the coronavirus does not provide any further information on the situation as at the balance sheet date. This may, of course, be different if the company has significant activities (whether or not through a stake) in areas already affected by the coronavirus in 2019.
This means that the coronavirus is only disclosed under 'Events after the balance sheet date' in the annual accounts. The management report also explains the main risks and uncertainties related to the coronavirus.
The rapid developments with regard to the coronavirus continuously lead to new insights and measures. This may mean that between the time the annual accounts are drawn up (dated) (and the auditor's report is issued) and the time the annual accounts are adopted by the general meeting, new facts and circumstances appear that require adjustment of the annual accounts. This requires timely and careful consultation between management and the auditor. It is important that the annual accounts continue to give a true and fair view of equity and result, including an explanation of events after the balance sheet date.
The coronacrisis may also have consequences for the auditor's report. It makes little difference whether a control, assessment or composition statement is issued. The most common situations are the following:
- If the crisis leads to serious uncertainty about continuity, the auditor is obliged to pay attention to this in the auditor's report. The auditor refers to the explanation of the continuity uncertainty in the annual accounts;
- If there are significant events after the balance sheet date (for example devaluation of assets as a result of the coronacrisis), the auditor will address the situation in an explanatory section;
- There may also be a situation where the auditor is unable to obtain sufficient audit evidence. For example, because certain locations of the client cannot be visited or foreign auditors called in cannot obtain or provide information. This could possibly lead to a non-approval audit opinion because the auditor is unable to express an opinion on the annual accounts;
The coronacrisis teaches us that there are daily (sometimes major) changes in the policy of organisations and the consequences this has. This also has consequences for the annual accounts and the role of the accountant. It is important for the
management to consult with the auditor in good time and on an ongoing basis in order to ensure that the annual accounts - including the consequences of the coronacrisis - give a true and fair view of the situation in which the company finds itself.
WANT TO KNOW MORE?
Do you have any questions about this article? Then please contact Anton Dieleman, Director of Technical Accountancy via e-mail or by phone: +31 (0)88 277 15 82. He would be happy to assist you.