Third lockdown ‘far more challenging this time around’ for auditors
The timing of England’s third national lockdown has posed new and more difficult challenges for audit firms to overcome, that could see annual results delayed or even qualified.
With lockdown rules urging people to stay home to stop the spread of coronavirus, auditors are struggling to physically carry out necessary tasks to perform an audit.
The lockdown is particularly affecting audits of businesses with inventory. As part of an audit of a company with inventory – often retailers – a stocktake must be carried out, and the auditor must physically count the company’s stock, but lockdown health and safety rules are preventing auditors from being able to do so.
David Herbinet, global head of audit at Mazars, estimated around 70 to 80 per cent of companies with inventory have been affected. If England is still in national lockdown by mid-March, he said, things could get “really, really tricky”.
Companies have within four months of their financial year-end to publish their results. If a stock take cannot happen in those four months the results would be considered late, and a company could receive a qualification on their accounts, “which is not good,” Herbinet added.
The global head of audit said there was a high chance results would be pushed back this year as a consequence of the lockdown.
“We don’t force anyone to do [stock-takes] within our team. But a lot of people are very happy to have an excuse to go somewhere, so we’re not struggling to find volunteers,” Herbinet said, “but a lot of companies are forbidding us from doing them.
“I can think of one company we’re dealing with, for example, where 90 per cent of the stock take was done before Christmas, but we’re not finding a way to cover the remaining 10 per cent.”
England entered its third national lockdown on 4 January, following a rise in the number of coronavirus cases across the country. No date has been given for the end of the lockdown, and politicians have suggested the country is like to return to some sort of tiered system, rather than be freed up entirely.
Herbinet said Mazars was also dealing with “quite a few” companies with finance departments significantly impacted by the pandemic, and with an international workforce, some Mazars staff were stuck overseas after visiting family during December.