COVID-19 has presented practical challenges that impact an entity’s ability to produce timely, reliable, insightful information.

The financial reporting ecosystem is necessarily irreducible – meaning that each part is integral to the proper functioning of the others – and, therefore, the entire ecosystem must adapt in concert and with speed. Management, audit committees, regulators, policy-makers, standard-setters, investors, and auditors are in this together! It’s important to remember that the purpose of the financial reporting ecosystem is to serve the public interest by enabling complete, accurate, transparent corporate financial disclosures.

Deloitte welcomes the public statements and guidance issued by many regulators that recognize the current uncertainties and emphasize the importance of high-quality, forward-looking corporate disclosures. Importantly, some regulators have conveyed that good faith attempts to provide investors and other market participants with appropriately framed forward-looking information should not be second-guessed (see Appendix).

Statements like these can instill companies with comfort that when today’s disclosures are judged in the future, their good faith and robust disclosure based on what is known now, will not be judged more harshly than necessary. Said differently, what happens in the future is likely to be different to what any company can foretell or speculate today, even with the best tools and judgment. Public acknowledgment by regulators now bestows a welcome level of surety to companies and auditors alike. Exercising judgment consistent with relevant auditing and accounting standards in the COVID-19 environment is complex, and the story of COVID-19’s impact on financial markets will not be complete if told from the future alone.

All stakeholders of the financial reporting ecosystem must exercise significant judgment in this unprecedented and uncertain environment – governments, when projecting the length of closures; bankers, when deciding if a loan can be repaid in full; management, when evaluating if a company can continue operating as going concern; auditors, when assessing these judgments, and investors, when analyzing the available financial information in light of these unprecedented uncertainties.

Deloitte seeks to raise awareness about the areas that pose challenges and require more scrutiny, context-specific judgment, and increased documentation1. There is benefit to the public from various financial reporting ecosystem stakeholders raising awareness about these issues; the public will gain more clarity about the responsibilities of audit committees, companies, auditors, and other stakeholders.