Companies and auditors are grappling with logistical hurdles in adhering to reporting deadlines and completing site visits.
Photo: charles platiau/ReutersLONDON—U.K. regulators are giving listed companies and their auditors a bit of relief against the backdrop of the coronavirus.
The Financial Conduct Authority, Financial Reporting Council and Prudential Regulation Authority announced a series of measures Thursday to ease the burden of financial reporting, including an extra two months for listed companies to publish audited annual financial reports and guidance for auditors grappling with new uncertainties.
“The coronavirus pandemic is causing companies of all types to significantly adjust their business and operations,” the FCA said. “Companies and auditors should be granted time.”
The regulators also said companies due to select new auditors should delay that process and can postpone rotating audit partners that are supposed to change every five years.
The changes were welcomed by accounting firms such as Ernst & Young LLP and Deloitte LLP and corporate-governance bodies, which have pointed to logistical hurdles for companies and auditors in adhering to reporting deadlines and completing basic functions such as site visits. Many companies in the U.K. and globally are expected to update their earnings guidance in coming months because of the virus’s impact on their operations.
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“There’s going to be a lot of judgment required from auditors,” said Nigel Sleigh-Johnson, a director at the Institute of Chartered Accountants in England and Wales. “They’re going to have to challenge management’s forecasts and estimates. Auditors will have to retain a high degree of professional skepticism in these circumstances.”
Hermione Hudson, head of audit at the U.K. unit of accounting firm PricewaterhouseCoopers LLP, said in a written statement the firm welcomed the coordinated response from regulators. “There is a greater likelihood of modifications to audit opinions during this period of disruption,” she said.
The new rules follow a move by British registrar Companies House this week to allow private companies to apply for a three-month extension in filing their accounts.
Roger Barker, head of corporate governance at the Institute of Directors, said the measures are sensible but that he would have preferred a blanket requirement for the delay, as opposed to giving firms the option to take advantage of it. The market might view companies delaying as a sign of weakness, he said, even if the delay is sanctioned by regulators.
Even in the current environment companies might feel self-imposed pressure to stick to the previous deadline, for fear of being seen in a negative light, he said.
Firms are still expecting to receive updated guidance as the situation evolves, they said. The U.K. branch of KPMG LLP said “remote working is effective and technology is a huge enabler, but there will be limitations,” which might prompt a need for “further guidance in the coming weeks.”
The Chartered Governance Institute, a governance body, plans to release guidance shortly regarding annual general meetings, many of which are supposed to take place in the next six to eight weeks. The institute will recommend that companies urge voting by proxy and try hosting meetings online with question-and-answer sessions, a representative said.
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Write to Julie Steinberg at julie.steinberg@wsj.com
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