President Gupta, ICAI leadership, distinguished colleagues, ladies and gentlemen, my name is In-Ki Joo. I am President of IFAC, the International Federation of Accountants.

I am proud to represent all of IFAC’s members and the work we do in a global context. It is my privilege and honor to speak with you.

Part of what brings us together today is also, of course, what is keeping us apart. Just two months ago, we didn’t expect the coronavirus would develop into pandemic that it has today. Now, it is afflicting almost every country throughout the world.

It is continuing to cause unprecedented challenges to our humanity, in terms of the public healthcare, economic stability and politics and culture.

It also now causes critical challenges to our profession.

I hope and I am sure that the world will cope with these challenges wisely and quickly through worldwide collaboration. I would like to thank you for accommodating my participation from afar, at my home in Seoul.

As we talk about global challenges and smart solutions, your thoughtful and proactive response to this crisis—balancing practical realities with our need to persist in our work—is a testament to your vision and leadership.

And I would like to congratulate you for this outstanding conference. I understand that about 50,000 people are joining this conference. Well done!

ICAI is one of IFAC’s more than 170 members in more than 130 countries, which together represent more than 3 million professional accountants. Since ICAI joined the IFAC family in 1977, ICAI members have served with distinction on the IFAC Board, its committees, and the international standard-setting boards that IFAC supports.

I want to acknowledge the service and leadership of several of your members:

• IESBA member Sanjiv Kumar Chaudhary
• My IFAC Colleague Kumar Raghu
• My IFAC Colleague and past CAPA president Manoj Fadnis
• My IFAC Colleague Naveen Gupta
• My IFAC Colleague, and your former president and Chair of the Executive Committee of the World Congress of Accountants 2022 Prafulla Chhajed

Thank you all for your commitment to the profession.

Now to turn to the topic at hand:

We know that COVID-19 is turning the world upside-down, but as a profession we can—and must—work to provide the essential services we need to bring to the global economy and civil society.

This conference, with the impressive lineup of speakers you have invited from around the world, is exactly the kind of engagement the profession needs right now. This crisis is worldwide; we are all facing the same problems, and we all need solutions.

The author of Sapiens, Yuval Noah Harari, predicted that after the storm passes, we will inhabit a different world. We may not be sure what kind of the world we are going to face, but this different world will include:

1. More digital communications rather than in-person contacts.
2. More environmental and public health protection.

On the other hand, the current business environments is being severely disrupted. As the result of lockdowns everywhere, closed borders are disrupting business locally and internationally, we have found that global economic cooperation is easily disrupted by the closed factories in affected regions.

This phenomenon has caused supply chain problems for global production lines from platform companies to local suppliers. Due to a severe lack of business transactions, a cash shortage and a dramatic decrease in profits awaits almost every business.

These companies, especially small- and medium-sized entities (SMEs), do not have enough cash to endure the several months during which there will be no sales. These types of businesses will soon face extreme liquidity problems with the distinct possibility of them becoming bankrupt.

This phenomenon threatens to be common across the world and hits SMEs and small- and medium-sized practices (SMPs) hardest.

Governments, societies, businesses, professionals, and every sector of society are making their best endeavors to stall this appalling chain reaction and restore the economy back to normal. Our profession, of course, should do its best to contribute to this endeavor.

As we can see in IFAC’s Vision, our profession is set to be essential to strong, sustainable organizations, financial markets, and economies.

Our profession must join the efforts in restoring the economy back to normal through persistent enhancement of the relevance and transparency of the business reports for decision makers and key stakeholders.

It is noted that in the US, the SEC released a public statement regarding the importance of disclosures related to COVID-19, particularly forward-looking disclosures to provide investors and the markets with information necessary to make informed decisions.

Integrated reporting can be an efficient and effective tool to communicate an entity’s strategies for the future to key stakeholders. But it becomes an even bigger challenge to prepare an integrated reporting under the current disruptive circumstances.

In addition to this, I would like to offer a few thoughts on how to handle what we have already seen, and how to prepare for challenges on the horizon.

Some challenges we are now facing.

We can see many things coming to our profession.

For organizations facing deadlines for reporting, for example, the loss of time and the restrictions of physical distancing will affect the ability of auditors, preparers, and issuers to do their jobs and report their findings promptly.

Our list of challenges is formidable and the uncertainty around them is significant.

• How will we respond to physical disruptions not only in our clients’ operations, but also our own?
• What if audit evidence available during this crisis is simply too little or too weak to inform an audit opinion in time for legal deadlines?
• How will asset devaluation affect the viability of countless businesses, and raise questions around Going Concern status?
• How will we deal with legal and contractual non-compliance as supply chains crumble and cash flows dry up?
• How will professional accountants meet their continuing professional development (CPD) requirements?
• What should we do to promote the well-being of individual professional accountants?
• And how do we handle the onboarding of new hires?

These are just a few of the many enormous questions we must answer. These questions are way more relevant to SMEs and SMPs.

The many insights of the contributors to our discussion today will help the accountancy profession learn, focus, and adapt. But we should not expect to solve all of our problems today. We will have to live with uncertainty about this virus—maybe for a long time.

We are used to the idea that change is coming.

The urgency and scale of the COVID-19 crisis is exceptional, but for professional accountants, the necessity of growth and adaptation is not. Fundamentally, our goals have not changed. A financial statement is still a financial statement, and an audit is still an audit. However, many of the ways we achieve them will change.

The imperative for all of us is creativity and flexibility. Using digital tools is a good place to start. Inventory observation, for example, cannot proceed in-person when lockdown orders keep auditors from visiting their clients. But some auditors might be able to video conference into their clients’ facilities to check inventory remotely.

Of course, this example that I have just raised is quite narrow compared to the broader issues we must consider. There might be dead-ends—things we find we cannot do right now, and that must be postponed.

These will be important issues to define and raise with clients and with regulators as soon as possible, as they will substantially affect audit opinions.

IFAC is working with firms, member organizations, and all others in the IFAC network to address these points.

This effort will be easier if we are all in it together, which brings me to my next point. 

We must learn from each other.

Many organizations are publishing material about reporting and assurance services during the COVID-19 crisis. I commend ICAI for being a leader among them.

Your piece, “The Impact of Coronavirus on Financial Reporting and the Auditors Consideration,” for example, is a remarkably thorough and helpful document, both for its specific guidance to Indian professional accountants, and for its general comments on the impact of COVID-19 on reporting and assurance.

We have posted a link to that piece on IFAC’s dedicated COVID-19 resources page.

We have found thought guidance from all over our network, including many content hubs hosted by member organizations with an outstanding breadth and depth of information. We see that SMPs and their SME clients are especially vulnerable to the financial and practical consequences of this crisis. As the profession is rallying to provide solutions and guides to navigating this crisis, we aim to get this information to SMPs and SMEs that might need it.

We recently updated the site to include online CPD opportunities shared by our member organizations that are being made available to each other, including ICAI’s.

The World Bank and some large firms have cited this IFAC initiative as a valuable platform. The material we have curated is a true testament of the profession coming together for the common good and in the public interest.

I encourage everyone, especially SMPs, to visit our page, and to explore what the accountancy profession is seeing and saying during this crisis.

IFAC is working to facilitate the exchange of ideas. Thank you for being partners in that exchange.

I would like to emphasize that we can learn from each other’s best practices.

ICAI has led by example with its digitalization of member and student services. This digital transition will be crucial for all PAOs in the immediate future.

We must learn from each other and collaborate with each other to cope with this unprecedented situation and lead all efforts to ensure a better future.

IFAC as the global accountancy profession is in the best position to facilitate this collaboration across the world. The COVID-19 resources page is a good example.

Ladies and gentlemen, I would like to emphasize two things.

• The digitalization in our daily life will proceed at a much faster speed.
• The world will become even closer and more cooperative rather than separated and isolated through our collaborative efforts in coping with the coronavirus across the globe.

No one knows when this global health emergency will subside. But in the meantime, as professional accountants we must carry on and keep sight of our goals. Our work in the public interest is more important now than ever.

It has been a great pleasure to join your conference today. I would like to wish you well.

Thank you.

Key IAASB Strategy and Work Plan Elements

The strategy sets three strategic objectives to focus IAASB priorities and resources during 2020‒2023:

Impact of the COVID-19 Pandemic on Reporting and Assurance

Good morning from the Washington, DC, area, in the United States. I am honored to be invited to speak today. I thank the Institute and its leadership for organizing this conference. I greatly appreciate your efforts to galvanize the profession in its response to this truly global crisis. I look forward to hearing the remarks of the distinguished panelists.

My name is Tom Seidenstein, and I currently serve as chair of the International Auditing and Assurance Standards Board (the IAASB). I am sorry that my first formal interaction with the Indian Institute in my current role is under these circumstances. My hope is that in the not-so-distant future, we could meet in person, in much better times. For now, please accept my best wishes for the health and well-being of those attending the conference virtually, your families, and the broader communities in which you live and serve.

When I joined the IAASB nine months, I accepted this role with a core belief. Setting standards at the international level is the most effective way to respond to the relentless globalization of business and avoid the economic costs and regulatory arbitrage that come with a fragmentation in rules. Global approaches to global challenges. My belief in the value of global approaches remains firm. Of course, COVID-19 has created a global crisis, and the economy has been a major casualty.

In the brief time allocated to me, my remarks will focus on three areas:

• First, working together on both national and international levels, standard-setters, regulators, accounting and audit practitioners, preparers, and other stakeholders can make a meaningful difference in helping the economy get back on its feet.
• Second, the IAASB stands ready to support the public interest and the external reporting community. We will create targeted guidance, where appropriate, adapt our ways of working to be flexible to rapidly changing circumstances, and coordinate with key parties.
• Third, a few areas of our standards merit special consideration by the profession. These include going concern, auditor reporting, and auditing estimates.

Rising to the challenge and Restoring Confidence

I am sure that at some point this crisis will become very personal for everyone. Maybe it will be the favorite local business that needs to shut its doors. Or maybe the neighbor who loses her job. Or a friend that sadly catches the virus. I am certain that we will all be touched.

I have been inspired by how people are responding to the crisis. It seems as if we are trying to do the best to help. I am here to say that all involved with the world of accounting and auditing have an important role to play.

This is not the challenge that I imagined facing in my first year. However, it is the one that we collectively face, and together we should rise to meet it.

Now more than ever, we need confidence to return in order to enable capital to flow freely again and the economy to grow. Where we sit, it is sometimes easy to get lost in the technicalities of accounting and standard setting.  However, at its best, the profession can play a critical role in ensuring trust and confidence in markets.

Auditors are responding by adapting their ways of working and utilizing remote techniques and technology. It is no time to relax the commitment to the public interest. For the profession, this means adhering to the highest ethical standards, communicating intensively with preparers and those charged with governance, and applying both professional judgment and skepticism.

I often say that the financial reporting world works in a highly connected ecosystem. Preparers of financial information, standard-setters, and regulators also need to each perform their role for the system to work. A weakness in any one part of the reporting ecosystem will have reverberations throughout.

Standard setters and regulators are adapting. We do so with the recognition that we are operating in a period of enormous uncertainty, and that all judgments, even if appropriately reasoned, documented, and communicated, will not always be right in hindsight. However, we can do our best to provide greater guidance, when possible, to those trying their best to comply with our standards and rules. Standard setters need to exhibit a sense of flexibility in terms of our work program priorities and imposing additional requirements on our stakeholders.

IAASB Standard-Setting Response: Calibrating, Reacting Agility, and Coordinating

We at the IAASB are trying to practice what we preach. Our response is three-pronged:

1. We are calibrating our existing program to prioritize our COVID-19 response and other leading public interest issues on our work plan, including our Quality Management work, Going Concern and Fraud, and efforts aimed at reducing complexity for Less Complex Entities. I will discuss some of our specific COVID-19 guidance shortly.
2. We are embracing technology, as others are, to advance these priority projects and will be appropriately flexible when it comes to our previous agreed timelines. For example, we are about to publish our Exposure Draft on Group Audits. We have already agreed to an extended comment period. At our upcoming meeting in June, to be conducted via videoconference, we will discuss the impact of the current crisis on other work and effective dates.
3. We are coordinating with national audit standard-setters, securities regulators, independent audit regulators, the International Accounting Standards Board, and professional bodies, particularly via IFAC. Our aim is to share information and discuss how we are individually responding to the crisis. We are successfully identifying areas where more work is needed and hoping to avoid redundant or confusing efforts.

Areas of IAASB Focus to Help

A minute earlier, I mentioned that the IAASB is developing guidance in the form of Staff Alerts to help the profession to better apply our standards. These Staff Alerts do not change the requirements of the standards. The Alerts highlight specific areas of focus under the current environment. The IAASB has already published, on its Website, a general Staff Alert aimed at broader considerations. We are developing five more on Going Concern, Auditor Reporting, the Audit of Accounting Estimates, special considerations for public sector auditors, and subsequent events.

Let me touch on Going Concern, Auditor Reporting, and Audit of Accounting Estimates and give you a preview on what we expect to cover in our upcoming Staff Alerts. These three areas are the topics that come up most in my discussions. First, we believe our principles-based standards are robust enough to be adapted to the current environment, where there is a focus on uncertainty and judgment. We also need to keep in context the responsibilities of auditors (vis-à-vis the responsibilities of management) – neither of which is easy in these uncertain and unknown times.

In terms of going concern, our focus is on the auditor’s understanding of management’s process for meeting the requirements of the applicable financial reporting framework. That understanding will help the auditor determine whether what management’s presentation of the financial information in the financial statement is fine, whether highlighting something in the auditor’s report is needed, or whether further modification (such as a qualification or a disclaimer) is required.

We know in many instances this will be challenging, particularly where it is a ‘close call.’ We cannot mandate when modifications to the auditor’s report may or may not be needed (the standards set out what needs to be done). We do encourage a heightened sense of professional skepticism when undertaking this work.

Auditors can use Auditor Reporting as another way to enhance confidence in external reporting, including in areas such as going concern. Our standards set out circumstances when an emphasis of matter is needed or another modification, including qualification, disclaimer, or an adverse opinion. There may be considerably more circumstances now where modification may be needed. In-ki alluded to various scenarios where there may be issues around gathering audit evidence. In some cases, alternative procedures may provide what is needed; in other cases, the auditor may need to consider the impact on the auditor’s report.

Disclosure by management takes on ever increasing importance in these unprecedented times. While it will depend on the circumstances, I expect that users would expect increasing transparency related to current business risks and mitigation strategies. These disclosures will also support the work of auditors. Auditors should then focus on the relevant requirements in the financial reporting standards to ensure that appropriate and necessary disclosures are made and their impact on the auditor’s report. One area to provide further transparency is Key Audit Matters (KAMs) where they are used under ISAs. Particularly for listed companies, KAMs may play an important role in enhancing the information of the auditor’s report relating to matter that, although resolved, required significant auditor attention. KAMs may also be a useful way of highlighting some of the uncertainty and judgment needed by the auditor.

Finally, we expect the audit of accounting estimates to become even more important over the coming months. The IAASB cannot emphasize enough the need for a heightened professional skepticism when auditing accounting estimates. Our newly revised ISA 540 helps the auditor home in on those specific inherent risks attached to estimation uncertainty. The standards and our forthcoming guidance also highlight other inherent risk factors that need to be considered, even more so now. The reality is that last year’s approach may not work for the current circumstances. We expect disclosures of estimates to be a focus for auditors, as is the testing of controls.

Towards Better, More Confident Days

I have outlined the IAASB’s initial response to the crisis. I say initial response, because I know that there will be twist and turns. Through our coordination efforts, we know that we will need to adapt. However, I wish to convey that the IAASB is ready to play its role in helping to rebuild confidence in the global economy. The coming days, weeks, and maybe even months will inevitably be challenging. I am pleased that we stand well positioned to do our small part.