The council said that “uncertainty” amongst companies has “increased sharply”, which will affect both auditors and companies proposing to report results in the coming months.
The FRC also warned that companies would face difficulties in preparing accounts and carrying out audits. It is now urging audit firms to consider developing alternative audit procedures in light of restrictions on travel, meetings and access to company sites.
It said that the outbreak should “not undermine the delivery of high-quality audits”, and that audits must continue to comply fully with required standards.
Auditors were also warned that “additional time may be required to complete audits and it is important that this is taken, even at the risk of delaying company reporting”.
They were urged to consider the pandemic’s impact on how they “gather sufficient, appropriate audit evidence, recognising that the planned audit approach may need to change and alternative procedures developed”.
The FRC also told auditors that they must “reassess key aspects” of their audit as a result of the “fast-changing situation”, which may require management to provide further evidence.
Auditors will also need to engage with the companies they audit to “ensure they set clear expectations as to the level of disclosure they expect to see in annual reports to communicate the impact and risk of COVID-19 on the company”.
The FRC’s executive director of supervision, David Rule, said: “Given the growing impact of coronavirus on the global economy and the high degree of uncertainty, high-quality audits are vital to ensure users of financial statements are properly informed.
“In many instances, auditors will need to consider developing alternative audit procedures to gather sufficient, appropriate audit evidence.”
He added: “Audits should continue to comply fully with required standards. Additional time may be required to complete audits and it is important that this is taken, even at the risk of delaying company reporting.
“The FRC remains in close discussions with the largest audit firms to ensure any issues are being appropriately managed.”