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July 23, 2020 07:43 PM

COVID-19 Impacts on European Audit Opinions

Posted by jmckeon

This analysis was originally posted by Audit Analytics.

This post will be updated to reflect the current number of filings citing the COVID-19 pandemic in a going concern opinion, key audit matter, or emphasis of matter.

Overall Statistics

As of the week ended 17 July 2020, Audit Analytics has observed the following trends in European audit opinions referencing COVID-191:

  • Going Concern Modifications: 126
  • Emphasis of Matter: 215
  • Key Audit Matters: 336

Based on company headquarters, the United Kingdom has continued to see the most audit opinions referencing COVID-19, with 307 references to the pandemic in a going concern modification, a key audit matter (KAM), or an emphasis of matter paragraph. Poland comes in second, with 103 references in audit opinions concerning the coronavirus in those components of the audit opinion.


Going Concern Audit Opinion

A going concern modification is the expressed uncertainty that a company is able to continue in the near future. Generally speaking, this uncertainty relates to whether the company will exist for another 12 months. The specifics of the long-term and extensive impacts of the coronavirus are currently unknown, but it is known that COVID-19 has the potential to materially impact operations across a wide variety of companies.


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As of the week ended 17 July 2020, non-Big Four auditors have signed the majority of going concern audit opinions for European filers referencing COVID-19. The vast majority (70.1%) of companies receiving going concern audit opinions are small- cap companies, with a market capitalization under €100 million; less than 5 going concern audit opinions have been issued to large- cap companies, suggesting that smaller companies are continuing to be significantly impacted by the uncertainties surrounding the COVID-19 pandemic. Of companies that have received a going concern audit opinion related to coronavirus, nearly 51% are in the Services or Manufacturing industry.

Key Audit Matters (KAMs)

KAMs are intended to increase the usefulness and information provided in the auditor’s opinion. The disclosures made by the auditor are supposed to describe an area of significant audit risk, a summary of the auditor’s procedures to test the audit area, and any key observations of the auditor with respect to that risk (where appropriate). Considering the uncertainties regarding future impacts of the coronavirus pandemic, auditors may address the risk of that uncertainty in a KAM.


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As of the week ended 17 July 2020, PwC has identified the most KAMs related to COVID-19 in audit opinions for European filers. The majority (53%) of companies receiving KAMs related to the coronavirus have been small- cap companies with a market capitalization under €100 million. Since the beginning of June, there has been an increase in the number of COVID-19 related KAMs found in audit opinions for large- cap filers with a market capitalization over €1,000 million. Nearly 30% of companies that have received a KAM related to the pandemic to this point have been in the Finance, Insurance, and Real Estate industry, while 43% have been in either the Manufacturing or Services sector.

Emphasis of Matter

An emphasis of matter paragraph is a component of the auditor’s report on financial statements that addresses matters that the auditor considers is fundamental to the overall understanding of financial statements. Given the widespread effects of coronavirus on companies and their financials, it is not surprising to see the COVID-19 pandemic mentioned as an emphasis of matter in financial statements.


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As of the week ended 17 July 2020, of the Big Four firms, PwC and EY have each signed more than 10 audit opinions that reference COVID-19 in an emphasis of matter paragraph for European filers; non-Big Four auditors have signed over 150 opinions containing an emphasis of matter related to the pandemic. Roughly 75% of the companies with an emphasis of matter paragraph referencing the pandemic are small- cap companies, with a market capitalization under €100 million. Nearly 30% of companies to have an audit opinion referencing the coronavirus are in the Manufacturing industry, while 45% are in the Services or Finance, Insurance, and Real Estate sectors.


For more information on this analysis, or to request a demo of our Europe databases, please contact us.

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1.This analysis is based on audit opinions collected by Audit Analytics. Weekly totals reflect the total number of filings per week and may change over time as filings are added to the database. Firms without an available market cap are excluded from the market cap analyses in the tables, but are included in the weekly totals. For dual signed audit opinions, both auditors are included in the auditor analyses in the table and are included in the cumulative count by auditor, but the opinion is counted once in the weekly totals. ↩

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About jmckeon

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Senior Research Analyst - Audit Analytics

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