This year has brought about an array of changes. When 2020 began, CPAs were anticipating a much easier busy season after dealing with changes brought about by the Tax Cuts and Jobs Act in 2019. Additionally, financial markets were high, and everything seemed to be full speed ahead, with no foreseeable issues or speed bumps.
However, things did not stay like this for long. As COVID-19 emerged, the hospitality and travel industry has all but disappeared, commerce has fallen significantly, and millions of people – across the globe – are dealing with shelter-in-place and social-distancing recommendations. With these new orders in place, many owners, and employees of different CPA firms, along with their clients, had to begin working from home.
The existing engagements for all parts of an accounting practice have been affected and this new, unknown landscape seems wrought with new challenges. While this is true, it is also presenting new opportunities to help clients navigate through these difficult and challenging times.
Even though much of the world is still focused on the direct impact caused by COVID-19, the indirect effects – lie in the state of the economy and the services and solutions being offered by CPA firms, such as help with the ASC 606 form, it is clear that this pandemic is going to have possible long-term liability issues that need to be known and addressed now.
It is important to consider the areas of services that have been affected in the accounting world to ensure that CPAs and other accounting businesses are taking the right steps to ensure ongoing success and growth for their firm and future.
Attest and Audit Services
There is a good chance that the former planning and risk assessment procedures that were put in place did not address an event like COVID-19 or the risk of any type of pandemic. However, new circumstances have occurred that necessitate CPA firms reassess and modify their planned approach.
It is important for CPA firms to consider how COVID-19 is impacting their client’s businesses. This is especially true for the impact on the financial statement amounts that require estimation or judgment, like revenue recognition or asset valuations. Other disclosures, like growing concern or uncertainties and risks, or modifications to the CPA firm’s report could be necessary. If the business of a client happens to fail later, the investors and lenders could blame the CPA firm for the investment they have lost. This is especially the case if the disclosure was not adequate of if the firm found any type of misstatement in the financial statements.
It may also be necessary to make accommodations for clients who are approaching the end of their fiscal year. For example, it may not be considered “safe” to perform any type of physical inventory, and all types of fraud inquiries may have to be handled virtually. If the client and the engagement team are working remotely, how is it possible to test and gather evidence?
Take time to assess the engagement plans in place to figure out if modifications are needed to comply with the set professional standards. It is a good idea to talk about modifications with the client, too, as the realization or engagement fee could also be impacted.
Even though the estimated tax payments and filing deadlines were extended for most types of tax returns, this was not the case for all forms. This resulted in tax professionals having a much busier, busy season than anticipated.
It is important to stay abreast of how the filing dates have changed and how these new dates may impact your clients. For example, if you fail to keep up with these changes and your clients face filing penalties, you may be held responsible.
If you want to keep up with the new dates and everything that has changed, using a docket system is best. With this in place, you can keep up with the new deadlines and ensure that you do not miss them. Make sure that you update the information for filing and payment relief that is currently granted and then continue to make updates as more changes are made.
Make sure that your clients fully understand what has been changed and what their responsibilities are after the COVID pandemic.
If your firm offers consulting projects, which include tax consulting, you may have to modify, postpone, or cease the action of clients conserving their cash flow. Take time to address the status of your consulting engagements in a proactive manner. If needed, you can update the engagement letters and other written communications that detail modifications that are needed.
As you can see, there are several ways that the CPA and accounting industry has been impacted by COVID. If you work in this field, it is a situation like many other businesses are facing – you must adapt and adjust, or risk being yet another victim of the COVID pandemic.