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Law360, London (February 18, 2020, 2:58 PM GMT ) The U.K.'s audit watchdog said Tuesday it is telling firms to identify and inform investors of specific company accounts that may be affected by the coronavirus epidemic in China.
The Financial Reporting Council said companies are required by law to disclose the main risks to their businesses. Companies — particularly those with Chinese operations or having close trading links with the country — should carefully consider what disclosures might need to be included in year-end accounts as they could be hit with staff shortages and production delays, the regulator said..
"Given the potential for rapid spreading of the virus, required disclosures will likely change over time as more information about the epidemic emerges," an FRC spokesperson said. "Companies will need to monitor developments and ensure they are providing up-to-date and meaningful disclosures to their shareholders when preparing their year-end reports."
The FRC is also in discussions with audit firms to assess the impact of the virus on their audits of U.K.-listed groups with Chinese subsidiaries which face statutory deadlines for publishing audited financial statements. Their ability to collect information and carry out checks on multinational clients could become affected by travel restrictions and other sanctions, the watchdog said.
The coronavirus outbreak prompted all levels of the Chinese government to take preventive measures to curb its spread, including extending the Lunar New Year holiday, quarantining the city of Wuhan — where the virus originated — and blockading highways and local roads.
Wuhan is a major automobile manufacturing hub, with Honda and Nissan operating plants in the city. Disruption to the supply chain could have a knock-on effect from companies around the world.
Last week British digger maker JCB cut working hours for thousands of employees prompted by a shortage of parts from China.
Lawyers are warning insurance companies to expect claims under business interruption policies to surge as the spread of coronavirus from China has an impact cuts business activity.
--Additional reporting by Martin Croucher. Editing by Rebecca Flanagan.
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