The Public Company Accounting Oversight Board staff is calling attention to some important considerations for auditors of public companies and broker-dealers as they plan and perform audits that may be affected by the ongoing war in Ukraine.
The PCAOB Spotlight document, “
The guidance comes after more than a month of fighting since Russia invaded Ukraine in late February, leading to thousands of lives lost, the destruction of cities like Mariupol, and more than 4 million refugees being displaced from their homes. In response, the U.S. and other NATO countries have leveled economic sanctions against Russia that have led to a steep drop in the price of the ruble and the closing of many foreign businesses.
“Beyond its terrible human toll, Russia’s invasion of Ukraine has produced economic and market implications that are still taking shape,” said PCAOB Chair Erica Williams in a statement Thursday. “Our Spotlight addresses key considerations for auditors, starting with a reminder of their obligation to comply with PCAOB standards and to exercise due professional care, which may take more time or effort in highly challenging or unprecedented circumstances.”
The document also reminds auditors to stay on top of developments that could affect a company’s financials. Knowledge obtained from previous audits or interim reviews may no longer be relevant given the current information environment. It’s essential for auditors to understand how changes in events, conditions and company activities can impact the risks of material misstatements, and whether those changes could give rise to new or different risks.
“These events also have broader global economic implications,” said the document. “Rising global inflation, driven partially by sanctions on Russia and supply chain issues, and the region’s market strength in oil and other commodities markets, may lead to higher interest rates. This in turn may increase borrowing costs for a variety of companies in various industries, whether or not they have direct business ties to the region. Fluctuations in foreign currencies, rising oil and gas prices, and volatility in some equity and commodity markets may also negatively affect some companies. As the potential economic impacts of the conflict continue to evolve rapidly, continuous monitoring of the situation and reassessing relevant implications remain important.”