The world for accounting and financial professionals is ever-evolving and growing increasingly complex, especially in unprecedented times like the COVID-19 pandemic. Though the office of finance has always faced high demands from both internal and external stakeholders, this responsibility has significantly increased in importance in today’s dynamic accounting environment. CFOs must be on top of all organizational matters, especially when it comes to financial reporting.
An article by Forbes recently highlighted a few considerations that CFOs should take into account when conducting their financial reporting process. Written by a managing director of Protiviti, Jim DeLoach, the article explores the aftermath of COVID-19 in relation to quality financial reporting.
- Changing Accounting Standards
- Reporting Integrity Advocacy
- Critical Audit Matters
- Meeting with Audit Committee
Changing Accounting Standards
First, he discusses the increase of accounting standards implemented by the Financial Accounting Standards Board (FASB) on a wide span of topics, leading to fatigue on the part of preparers. However, should organizations be slow to adopt these standards— a list is provided in the article— their CFOs should take notice, since the FASB and the Securities and Exchanges Commission (SEC) are unlikely to be sympathetic, considering the extensions they have granted due to the pandemic.
Reporting Integrity Advocacy
Next, DeLoach discusses the role of the CFO as a champion of the financial reporting process. They are uniquely positioned to ensure efficiency gains, as digital transformation in terms of RPA initiatives within finance becomes more widespread, as well as ensuring their organization’s financial reporting is reliable. CFOs must make certain that their internal controls are effective in addition to updating their finance and accounting teams’ technology.
Critical Audit Matters
A big aspect of the financial reporting process that COVID-19 has impacted is the audit process. Beginning this year, external auditors must include in their organizational assessments any areas that substantial judgment was exercised. These are called Critical Audit Matters (CAMs) and are always evolving, based on factors such as economic fluctuations or changes to business models to make a company more competitive. CFOs need to be prepared to understand and explain the issues if an auditor raises the possibility of a CAM, especially to internal and external stakeholders.
Meeting with Audit Committee
Historically, a best practice for identifying a potential CAM is to request an auditor perform a dry run of the audit so the CFO, audit committee and the auditor are all on the same page early. This should continue throughout the fiscal year to ensure that the possibility of a CAM is monitored.
COVID-19 has changed much of the world, especially in finance and accounting, and how business is conducted. CFOs must be aware of these changes, especially when it comes to the integrity of their organization’s financial reporting, as this has become an area subject to many modifications.
For the full Forbes article, click here.
To learn more about how to strengthen your regulatory reporting during COVID-19 and into the future, watch Trintech’s on-demand joint webinar with KPMG and Workiva.
Written by: Ashton Mathai