skip to content


Financing and the special role of boards of directors


Boards of directors and trustees play a critical role in helping businesses obtain financing during the COVID-19 outbreak. With cash flow tight, the business often needs to find financing urgently.

Management may forget the organization's best practices as they hurry to cover the cash crunch–adding risk the business can't afford. Directors and trustees therefore add more value than ever. To help the business, they need to protect it by maintaining focus on oversight and compliance.

Loans with audit delays

The business disruption triggered by COVID-19 makes oversight more challenging than usual for directors and trustees. Boards use audits to approve lending agreements. During the current crisis, auditors can't always access the records or physical spaces they need to report with confidence. Audits have been delayed–in some cases with no estimated time of issuance.

To approve and modify lending agreements, the board reviews background material prepared by management and provided to lenders. Directors and trustees face a particular challenge because they may not be able to access reliable financial information.

Lenders and regulators may ask businesses for additional or alternative financial information to substitute for an audit temporarily. A business may consider these other options to help lenders, regulators, or other interested third parties to continue making critical decisions.

These options include:

  • Cash flow projections
  • Other reporting options, such as:
    • Review engagement on historical financial statements to provide some level of comfort to third parties
    • Compilation engagement of historical financial statements
    • Assurance on certain elements of the financial statements of the business

Learn more about how to get financing without an audit

The role of the board: Cash flow projections

Because boards approve lending contracts, they need to understand and oversee the cash flow strategies prepared by management and presented to lenders. These cash flow projections can give lenders confidence in the business while COVID-19 continues to impact revenues.

Boards face these key questions when overseeing the cash flow strategy process:

  • The appropriateness and plausibility of the synopsis (or hypothesis) management has chosen to determine its cash flow scenarios based on varying outcomes to the business disruption due to COVID-19.
  • The nature of support for management's assumptions based on the various hypotheses underlying the cash flow scenarios:
    • Assumptions that are based on information that falls within the control of management and relates directly to the business, challenging management's expectations of its ability to bring operations back to a typical level of operations.
    • Assumptions that are based on general economic factors that are beyond the control of management, are not specific to the circumstances of the business, and must be interpreted and analyzed for application to the business, challenging management's expectations of significant impact on the business due to changes in consumer purchasing habits as a result of COVID-19.
    • The internal consistency of assumptions and their consistency with the plans, policies and budgets of the business.
    • The controls around the mathematical accuracy of the cash flow scenarios.
  • Whether there is evidence of misguided bias in the selection of assumptions by management that causes the assumptions, on an overall basis, to be unduly optimistic or pessimistic.
  • The sufficiency of disclosures accompanying the projection.

The role of the board: Other reporting options

Other reporting options are also viable alternatives; however, they do not produce an audit opinion of the historical financial statements of the business. As a result, they also won't fulfil any statutory or other audit requirement. However, until the audit process can resume, to oversee these reporting options, the board should consider:

  • Seeking unanimous consent of the shareholders to waive or defer the audit requirement where permitted under statutory or contractual requirements. (If consent is obtained, we request that you do not record this engagement as an audit engagement in any board or shareholder meeting minutes.)
  • Continuing to engage their auditor to complete an audit of the historical financial statements when possible under the circumstances raised by the COVID-19 outbreak.
  • Obtaining legal advice about any statutory or contractual audit requirements.

Discussions with your BDO advisor

Your BDO advisor can discuss a plan tailored to the needs of your board and the business. The plan may include one or more of the options above. None of these options replaces the eventual need for an audit of your financial statements. But relevant information can be provided to help lenders, regulators or other interested third parties make critical decisions. Early and regular discussions are recommended.

This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our privacy statement for more information on the cookies we use and how to delete or block them.

Accept and close