COVID-19: 4 Key Risk Areas for Accounting & Financial Reporting in 2020
To reduce costs during the COVID-19 shutdown, many public companies have reduced or furloughed accounting and finance staff, distancing them from institutional, process or system-based accounting knowledge needed to properly execute key operational accounting and financial reporting tasks during month-end and quarterly close.
As companies prepare and brace for the full impact of COVID-19, starting with June 30th (“Q2”) financial statements and disclosures and into the rest of 2020, accounting executives should consider the following to manage risk inside their accounting organization:
1. Managing Fatigue and Workload of Overburdened Accounting and Finance Staff
Without question, the unexpected and unprecedented nature of COVID-19 has placed a great deal of stress and strain on the workforce across America. Accounting and finance professionals are working and collaborating with their teams – locally and abroad – from home offices, which will likely become the “new normal” for many workers. This juggling act has led to an increased risk of mental overload and fatigue. Accounting leadership needs to ensure that their accounting and financial reporting staff remain engaged, feel connected, and understand they are supported and valued – ensuring the continued execution of key accounting processes and tasks and helping minimize financial reporting risk.
2. Look for Potential New Gaps in Internal Controls over Financial Reporting
As part of preparing and certifying Q2 financial statements, accounting leadership needs to ensure that execution and documentation of internal controls over financial reporting, including disclosure controls and procedures, continue to occur. This includes ensuring that a company’s supportive monitoring and detective internal controls are also performed and continue to operate effectively. Given the potential stress placed on the accounting and finance team, accounting leadership should not assume key controls are continuing to operate effectively but use this time to take a closer, all-around look. Consider coordinating with Internal Audit regarding the performance of additional and increased testing of key internal controls over financial reporting during Q2 and Q3 2020.