The Public Company Accounting Oversight Board (PCAOB) has issued a spotlight report on auditing considerations related to the invasion of Ukraine. The report addresses matters such as assessing risks, planning and performing audit procedures, possible illegal acts, reviews of interim financial information, and acceptance and continuance of clients and engagements. It also discusses considerations for audits nearing completion.

The report urges auditors to stay aware of developments that may affect the company, noting that knowledge obtained from past audits or interim reviews may no longer be relevant. It suggests that auditors consider how changes in events, conditions, and company activities may affect risks of material misstatement and whether those changes give rise to new or different risks.

“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 Y. Williams. “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 risks that the report warns of include supply chain disruptions, boycotts of a key suppliers, liquidity issues, unplanned reallocation of resources, heightened market volatility and reputational injury for companies that continue doing business with Russian entities. The report also warns of the possibility of fraud—for example, downplaying the effects of economic sanctions and make financial results more favorable to meet the expectations of third parties—as well as cybersecurity risks.  

With regard to audit planning, the report warns that “as conditions in the company’s environment evolve, auditors may need to revisit their initial assessment of risks and modify planned audit procedures. In some cases, auditors may need to perform additional or different audit procedures to obtain sufficient appropriate audit evidence compared to those performed in prior audits. The nature of the circumstances facing the company may pose unique challenges for the auditor.”  

The report focuses on “certain financial statement areas may be particularly affected by the changing conditions and present challenges to the auditor’s evaluation of the presentation of the financial statements and disclosures.” These include going concern, asset impairment and valuation, accounting estimates, revenue, debt and consolidation. 

The report notes that “some global accounting firms have begun to cut ties with Russian (and Belarusian) member firms of their networks” and that “ any shared- service centers based in Russia or Ukraine may no longer be operating,”  noting that “auditors who planned to use affected shared-service centers for certain audit procedures would need to modify their approach.” It also notes that “the rapidly changing environment may necessitate more frequent communications between auditors and audit committees.” 

Report also addresses the auditor’s responsibilities in the face of possible illegal acts: “If the auditor becomes aware of a possible illegal act by a client, the auditor is required to understand the nature of the act and evaluate the effect on the financial statements, including the adequacy of the company’s disclosure of the act on its operations. The auditor should also, among other things, ensure that the audit committee is adequately informed of the illegal act as soon as practicable.” 

The report also notes that if auditors “become aware of information that leads them to believe that the interim financial information is not in conformity with the applicable financial reporting framework, auditors have a responsibility to make additional inquiries or perform other procedures considered appropriate to provide a basis for communicating whether they are aware of any material modifications that should be made to the interim financial information.” 

With regard to renewing or accepting clients or engagements, the report says that “auditors need to carefully consider their ability to perform an audit in accordance with PCAOB standards taking into account factors such as: whether the company has any ownership interests or business relationships with companies or individuals that are subject to sanctions or other restrictions; the extent and nature of any operations the company has in the region affected by the conflict; and known limitations to the auditor’s ability to obtain sufficient appropriate audit evidence and apply all procedures necessary under PCAOB standards to express an opinion on the financial statements or internal control over financial reporting.” 

With regard to audits nearing completion, the report states that these “may pose specific challenges for auditors. … When auditors obtain audit evidence that contradicts previously obtained evidence on which their risk assessment was based, auditors are reminded of their responsibility to revise the assessed risk and modify planned audit procedures (or perform additional procedures) to respond to the revised risk.”  

“There may also be implications for the auditor’s report due to the effects of the current environment,” the report states. “Depending on the facts and circumstances of the specific audit, the auditor’s report may include critical audit matters (CAMs) required explanatory language/paragraph(s); voluntary emphasis paragraph(s 

And addressing scope limitation, the report states, “In the event the auditor concludes that a
qualification or a disclaimer of opinion is appropriate in the circumstances for an audit of the financial statements or internal control over financial reporting, the auditor is strongly encouraged to look to the relevant PCAOB requirements and consider the implications under Securities and Exchange Commission requirements resulting from departures from unqualified opinions.” 

The Public Company Accounting Oversight Board (PCAOB) has issued a spotlight report on auditing considerations related to the invasion of Ukraine. The report addresses matters such as assessing risks, planning and performing audit procedures, possible illegal acts, reviews of interim financial information, and acceptance and continuance of clients and engagements. It also discusses considerations for audits nearing completion.

The report urges auditors to stay aware of developments that may affect the company, noting that knowledge obtained from past audits or interim reviews may no longer be relevant. It suggests that auditors consider how changes in events, conditions, and company activities may affect risks of material misstatement and whether those changes give rise to new or different risks.

“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 Y. Williams. “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 risks that the report warns of include supply chain disruptions, boycotts of a key suppliers, liquidity issues, unplanned reallocation of resources, heightened market volatility and reputational injury for companies that continue doing business with Russian entities. The report also warns of the possibility of fraud—for example, downplaying the effects of economic sanctions and make financial results more favorable to meet the expectations of third parties—as well as cybersecurity risks.  

With regard to audit planning, the report warns that “as conditions in the company’s environment evolve, auditors may need to revisit their initial assessment of risks and modify planned audit procedures. In some cases, auditors may need to perform additional or different audit procedures to obtain sufficient appropriate audit evidence compared to those performed in prior audits. The nature of the circumstances facing the company may pose unique challenges for the auditor.”  

The report focuses on “certain financial statement areas may be particularly affected by the changing conditions and present challenges to the auditor’s evaluation of the presentation of the financial statements and disclosures.” These include going concern, asset impairment and valuation, accounting estimates, revenue, debt and consolidation. 

The report notes that “some global accounting firms have begun to cut ties with Russian (and Belarusian) member firms of their networks” and that “ any shared- service centers based in Russia or Ukraine may no longer be operating,”  noting that “auditors who planned to use affected shared-service centers for certain audit procedures would need to modify their approach.” It also notes that “the rapidly changing environment may necessitate more frequent communications between auditors and audit committees.” 

Report also addresses the auditor’s responsibilities in the face of possible illegal acts: “If the auditor becomes aware of a possible illegal act by a client, the auditor is required to understand the nature of the act and evaluate the effect on the financial statements, including the adequacy of the company’s disclosure of the act on its operations. The auditor should also, among other things, ensure that the audit committee is adequately informed of the illegal act as soon as practicable.” 

The report also notes that if auditors “become aware of information that leads them to believe that the interim financial information is not in conformity with the applicable financial reporting framework, auditors have a responsibility to make additional inquiries or perform other procedures considered appropriate to provide a basis for communicating whether they are aware of any material modifications that should be made to the interim financial information.” 

With regard to renewing or accepting clients or engagements, the report says that “auditors need to carefully consider their ability to perform an audit in accordance with PCAOB standards taking into account factors such as: whether the company has any ownership interests or business relationships with companies or individuals that are subject to sanctions or other restrictions; the extent and nature of any operations the company has in the region affected by the conflict; and known limitations to the auditor’s ability to obtain sufficient appropriate audit evidence and apply all procedures necessary under PCAOB standards to express an opinion on the financial statements or internal control over financial reporting.” 

With regard to audits nearing completion, the report states that these “may pose specific challenges for auditors. … When auditors obtain audit evidence that contradicts previously obtained evidence on which their risk assessment was based, auditors are reminded of their responsibility to revise the assessed risk and modify planned audit procedures (or perform additional procedures) to respond to the revised risk.”  

“There may also be implications for the auditor’s report due to the effects of the current environment,” the report states. “Depending on the facts and circumstances of the specific audit, the auditor’s report may include critical audit matters (CAMs) required explanatory language/paragraph(s); voluntary emphasis paragraph(s 

And addressing scope limitation, the report states, “In the event the auditor concludes that a
qualification or a disclaimer of opinion is appropriate in the circumstances for an audit of the financial statements or internal control over financial reporting, the auditor is strongly encouraged to look to the relevant PCAOB requirements and consider the implications under Securities and Exchange Commission requirements resulting from departures from unqualified opinions.” 

The Public Company Accounting Oversight Board (PCAOB) has issued a spotlight report on auditing considerations related to the invasion of Ukraine. The report addresses matters such as assessing risks, planning and performing audit procedures, possible illegal acts, reviews of interim financial information, and acceptance and continuance of clients and engagements. It also discusses considerations for audits nearing completion.

The report urges auditors to stay aware of developments that may affect the company, noting that knowledge obtained from past audits or interim reviews may no longer be relevant. It suggests that auditors consider how changes in events, conditions, and company activities may affect risks of material misstatement and whether those changes give rise to new or different risks.

“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 Y. Williams. “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 risks that the report warns of include supply chain disruptions, boycotts of a key suppliers, liquidity issues, unplanned reallocation of resources, heightened market volatility and reputational injury for companies that continue doing business with Russian entities. The report also warns of the possibility of fraud—for example, downplaying the effects of economic sanctions and make financial results more favorable to meet the expectations of third parties—as well as cybersecurity risks.  

With regard to audit planning, the report warns that “as conditions in the company’s environment evolve, auditors may need to revisit their initial assessment of risks and modify planned audit procedures. In some cases, auditors may need to perform additional or different audit procedures to obtain sufficient appropriate audit evidence compared to those performed in prior audits. The nature of the circumstances facing the company may pose unique challenges for the auditor.”  

The report focuses on “certain financial statement areas may be particularly affected by the changing conditions and present challenges to the auditor’s evaluation of the presentation of the financial statements and disclosures.” These include going concern, asset impairment and valuation, accounting estimates, revenue, debt and consolidation. 

The report notes that “some global accounting firms have begun to cut ties with Russian (and Belarusian) member firms of their networks” and that “ any shared- service centers based in Russia or Ukraine may no longer be operating,”  noting that “auditors who planned to use affected shared-service centers for certain audit procedures would need to modify their approach.” It also notes that “the rapidly changing environment may necessitate more frequent communications between auditors and audit committees.” 

Report also addresses the auditor’s responsibilities in the face of possible illegal acts: “If the auditor becomes aware of a possible illegal act by a client, the auditor is required to understand the nature of the act and evaluate the effect on the financial statements, including the adequacy of the company’s disclosure of the act on its operations. The auditor should also, among other things, ensure that the audit committee is adequately informed of the illegal act as soon as practicable.” 

The report also notes that if auditors “become aware of information that leads them to believe that the interim financial information is not in conformity with the applicable financial reporting framework, auditors have a responsibility to make additional inquiries or perform other procedures considered appropriate to provide a basis for communicating whether they are aware of any material modifications that should be made to the interim financial information.” 

With regard to renewing or accepting clients or engagements, the report says that “auditors need to carefully consider their ability to perform an audit in accordance with PCAOB standards taking into account factors such as: whether the company has any ownership interests or business relationships with companies or individuals that are subject to sanctions or other restrictions; the extent and nature of any operations the company has in the region affected by the conflict; and known limitations to the auditor’s ability to obtain sufficient appropriate audit evidence and apply all procedures necessary under PCAOB standards to express an opinion on the financial statements or internal control over financial reporting.” 

With regard to audits nearing completion, the report states that these “may pose specific challenges for auditors. … When auditors obtain audit evidence that contradicts previously obtained evidence on which their risk assessment was based, auditors are reminded of their responsibility to revise the assessed risk and modify planned audit procedures (or perform additional procedures) to respond to the revised risk.”  

“There may also be implications for the auditor’s report due to the effects of the current environment,” the report states. “Depending on the facts and circumstances of the specific audit, the auditor’s report may include critical audit matters (CAMs) required explanatory language/paragraph(s); voluntary emphasis paragraph(s 

And addressing scope limitation, the report states, “In the event the auditor concludes that a
qualification or a disclaimer of opinion is appropriate in the circumstances for an audit of the financial statements or internal control over financial reporting, the auditor is strongly encouraged to look to the relevant PCAOB requirements and consider the implications under Securities and Exchange Commission requirements resulting from departures from unqualified opinions.”