It is no surprise that COVID-19 has greatly impacted just about everything at this point; the worldwide pandemic has had such far-reaching effects, we’re only now beginning to understand how far the ripple goes. With that said, it’s also no surprise that the virus is impeding audit firms’ and accounting departments’ ability to perform their duties effectively in their usual timely fashion.
As previously mentioned, some regulators have promoted delaying the publication of annual accounts in order to provide more time for companies and auditors to address the logistical and qualitative challenges of preparing and auditing their accounts in a time of pandemic. In particular, regulators have urged companies and auditors to take extra time to measure and assess the implications of the current challenges on their finances and operations.
The delays are evident when looking at the number of European audit opinions signed in the first quarter of 2020 for companies with fiscal years ending December. In this post, we’ll take a look at how this year’s number stacks up to Q1 2018 and Q1 2019 by examining weekly opinion activity across five different countries that have some of the most companies filing annual reports.1
As displayed in the chart above, all countries examined have had significantly fewer opinions signed in Q1 2020 than in the past two years.
Below, we’ll look at the number of opinions signed in Q1 by week, per country. (Please note: Calendar dates refer to 2020.)
Beginning in week 8 (17 February), we began to see a decrease in the number of opinions signed in the UK. However, the most drastic reduction happened in week 13 (23 March), when there were 53 fewer signatures than in 2019. This directly coincides with the FCA moratorium on publishing annual results.
In Germany, week 9 (24 February through 1 March) saw a 55% drop in opinions signed between 2019 and 2020 going from 51 to 23. In week 11, the difference in the number of filings appeared to level off, but subsequently remained below prior year levels in weeks 12 and 13. Alone, March 2020 saw a 22% decrease in total opinions signed.
In Sweden, where there was no lockdown due to Coronavirus, we recorded the least significant delays of all the countries examined in this analysis. From 2019 to 2020, there was only a 17% decrease in opinion signatures in Q1. That said, week 13 – the last full week of March – experienced a 34% decline.
In Poland, the largest decline occurred in week 12 (16 March) when the number dropped from 79 to 47 signatures, a 41% decline. In total, there have been 26% fewer opinions signed in Q1 2020 than in Q1 2019.
By the last week of March 2020, there were a total of 48 audit opinions signed for Italian companies with fiscal years ending December 2019 – 83 fewer than were signed in Q1 2019. Considering that the nationwide lockdown began in week 11 (9 March), it is somewhat surprising that Italian auditors were able to continue signing opinions at all.
Looking at all five countries, there were 37% fewer opinions signed when comparing the average of Q1 2018 and 2019 to Q1 2020. We look forward to watching this drastic downward trend begin to level off – hopefully in the near future.
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1. Q1 of 2018 and 2019 had only 13 weeks, while two days of week 14 fall in Q1 of 2020 using the ISO week date standard (ISO-8601). These charts reflect audit opinions collected by AA as of April 16, 2020.↩