Over the past two decades, the US public company auditing profession has engaged actively with policymakers and others with an interest in high-quality auditing. Through a series of important measures by all participants in the US financial reporting ecosystem, significant, demonstrable gains have been achieved in audit quality, investor confidence and the reliability of financial reporting.
The importance of this robust system of standards and regulation is on full display during a crisis like the global COVID-19 pandemic. So is the importance of maintaining a strong culture grounded in independence, objectivity and values. Below are several actions EY teams are taking to strengthen our commitment to audit quality during COVID-19 so our profession can continue to serve the public interest.
Addressing financial reporting challenges
When the COVID-19 pandemic hit, we issued new guidance and policies and provided training and coaching to help our people address financial reporting challenges such as heightened estimation uncertainty and practical challenges such as how to audit inventory remotely. Our Quality Network stepped up their efforts coaching teams on the appropriate application of the impairment standards and other matters related to the COVID-19 pandemic.
A heighted focus on risk assessment
We focus on making sure the companies we audit share our commitment to quality and transparency in financial reporting, and we don’t pursue audits of companies that don’t share our values. This year, we also evaluated risks related to the COVID-19 pandemic and its economic fallout. We adapted our client continuance processes to consider the impact of the pandemic and the fluidity of the economic environment. Additionally, we worked with our teams to ensure our risk assessments were updated to account for changes in a company’s risk profile. The inherent risk is certainly higher in this environment and our teams understand the importance of professional skepticism and being alert for errors and fraud.
Maintaining oversight for component audits
When our audit work extends beyond the US, we have clearly defined processes for review and supervision of component teams supporting us in issuing our EY-US audit reports. We determine our level of involvement based on a number of factors including: our understanding of the nature and significance of the operations, our assessment of risks of material misstatement, management’s assessment of risks and expectations and our experience with the teams performing the work. In the current COVID-19 environment, we’ve considered ways to adapt to the environment, using technology to support supervision and review of component teams.
Investing in our people and our teams
In the face of the COVID-19 pandemic and resulting recession, we have focused on timely communication with our professionals and providing leadership and Firm support for them during extremely disruptive times. When the pandemic hit the US during busy season, many of our audit teams were working long hours to complete an audit. In response, we rapidly refreshed our suite of benefits — called Better You — to help our professionals maintain their well-being.