Impact and Importance of Financial Statement Audit on Government Responses to Covid-19 Pandemic

This report analyzes the impact and importance of financial statement audit on government responses to the Covid-19 pandemic. It discusses how audits help in planning and implementing economic stimuli and grants. The report also examines the current status of budget implementation and the fiscal impact of the pandemic on government accounting and budgeting.

PUBLIC SECTOR
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Impact of financial statement audits on the government responses to the Covid-19 pandemic. .1
Importance of financial statement audit on government responses to Covid-19 pandemic........2
FINDINGS.......................................................................................................................................2
Current status of the implementation of the budget during the Covid-19 pandemic...................2
Fiscal impact of the Covid-19 pandemic on government accounting and budgeting..................3
Recommendations on how financial statement audit improves the ways government used the
budget during the Covid-19 pandemic.........................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Public sector accounting is done in respect of the entities that are operating for the non-
profit purposes under the control of the central, local and the quasi government. These businesses
are generally run in the public interest and that is the reason that a well-established governance
system is to be built upon so that the loyalty and trust of the public in the government can be
established. This is the reason that the financial statements are to be audited of the public sector
entities which is covered under the public sector accounting. The current project report shall be
analysing upon the impact and importance of the financial statement audit on the government
responses that are made in the Covid-19. Apart from that it shall shed light on the
implementation of the responses and also the fiscal impact of the same.
MAIN BODY
Impact of financial statement audits on the government responses to the Covid-19 pandemic
The government of the various countries have effectively responded in the Covid-19
situation for the welfare and betterment of its citizens, businesses and the economy as a whole.
They have taken effective measures and built strategies that can uplift the current status of many
livelihoods and the small and medium enterprises so that they can recover from the current
disruptive states (Mnif Sellami and Gafsi, 2019). The responses can be in the form of grants,
subsidies, tax deferrals, loan guarantee schemes, employment schemes and the other economic
stimuli that have played the major role in recovering the businesses from the depression in the
state of the economy.
The financial statement audit and the financial reporting which can be final as well as
interim, both has the major impact on the government responses that are provided in the
epidemic of the corona virus. Since the public sector accounting helps in identifying the
surpluses and the deficits in the government account and that is verified by the financial
statement audits, this shall provide the clarity of the availability of the various funds and
accordingly the responses can be planned and implemented in the economy for featuring its
growth and development. The various schemes and the grants policies can be established
according to these audited financial statements. They are also impacting the various other
stakeholders or the users of the financial statements regarding knowing the actual contributions
that are made by the government and in accordance with that they can also donate so that the
public welfare functions can further be smoothed.
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Importance of financial statement audit on government responses to Covid-19 pandemic
The financial statement audit and the financial reporting made in front of the public is
one of the significant tasks for the public sector entities, as this shall be providing the true and
fair view of the businesses and if the statements are audited they shall be trusted and relied upon
by the public as to be accurate in all lines. These audited financial statements of the government
has also played the major role in defining the future budgets and activities that are to be
undertaken in response to the Covid-19 situation (Hay and Cordery, 2018). The ordering of the
vaccinations, masks, PPE kits, sanitizers from the other foreign parts of the world. The foreign
exchange balance has to be verified prior to placing any orders of importing the goods since it
can trap the economy in the vicious circle of the fiscal deficits. If any of such situations are
arising then the government can well in advance plan for the borrowings that are to be made to
restore the required balances.
Also if the verification of these financial statements show that the economy is facing the
fiscal deficits in that case the balances are to be rebalanced in the government account and
accordingly the plans have to be developed so that such that the balance of payments is
equalized. Post the auditing of the financial statements the government gets to know its real
position and through this they ensure the restricted application of the economic activity which
are the necessary sectors.
FINDINGS
Current status of the implementation of the budget during the Covid-19 pandemic
In most of the countries the current state is that the major proportion of the budget is
implemented to the responses that are provided by the government in the state of the corona virus
in the country. These responses are in the form of the public welfare programs and the upliftment
of the small and medium enterprises to reduce the impact of the disruptions and revive them in
the tough times (De Aquino and et.al., 2020). Since the corona pandemic have extended over the
period of one and a half years now so most of the treasuries of the public finances have been
swept away and the economy is in the serious crisis of the fiscal deficit wherein the expenditures
are more than the prospective revenues in a particular period and to meet them significant loans
have been borrowed from foreign further mounting the debts and deepening the crisis for the
country.
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It can be assessed that earlier there were major policy reforms in most of the significant
areas that are supporting the economic growth and development of the country ans this is the
reason many sectors were able to capitalize on the opportunities that were provided by the
market, but due to the fiscal impact now the budgetary planning have been executed in the
country and the public spendings have been are prioritized so that the essential allocations is
undertaken and the rest is used to back the economy with the resources.
In the current scenario of the corona virus it can be governed that the budgets are being
implemented in the country in the restricted manner to acquire the most benefit of it without
hampering the economic conditions in the rest of the world.
Fiscal impact of the Covid-19 pandemic on government accounting and budgeting
Due to the outbreak of the corona pandemic in the country it can be realized that the
government accounting and budgeting procedure has been severely impacted and this is the
reason it has caused the fiscal deficits in the government funds. It can be ascertained that in the
current situation the revenues in the fiscal accounts are less than the expenditures and this is the
reason for the mounting borrowings in the government account to meet the necessary
expenditures (The accounting, budgeting and fiscal impact of COVID-19 on the United
Kingdom, 2021). This has created the fiscal deficits in the government budget which can be due
to the extensive allocations in the grants and subsidies to the people. On the other hand the
revenues have decreased as they are further providing the tax deferrals and the various other kind
of reliefs to the people.
The fiscal transparency of the fiscal sustainability reporting shows that there are
unprecedented damages to the public finances and this is going to lead to the alarming effects on
the public sector organizations and the overall economic development of the country. The
treasuries were empty and this was the reason that the government had to make the debt finances
through borrowings so that the treasuries could be refilled (Brusca and et.al., 2018). The overall
budgeting are made in accordance with the
Recommendations on how financial statement audit improves the ways government used the
budget during the Covid-19 pandemic
There can be several recommendations which can be improved in case of the financial
audit and the budgeting during the Covid- 19:-
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 Once the audited financial statements are received by the business in that case the
government can re-prioritize the public spendings to lessen the fiscal impact in the
economy. This shall be helping in the generation of the supportive public finance
environment.
 The public financial management can be undertaken by budgetary allocation and strong
regulatory system shall be build for the economy. Specific processes must be undertaken
for the allocation of the funds to the various line items of the budget.
 A fixed blueprint can be derived regarding meeting all the other types of economic and
constraints within the limited portion of the budget and the major amount must be
retained for the responses in the Covid hit areas of the country.
CONCLUSION
From the above report it can be concluded that the public sector accounting and its
reporting post the auditing is very necessary so that the public of that country have trust on their
government and are assured of the fact that the various works that the government are doing are
in their favour. Specially in the Covid situation such auditing of the financial statements have
been very impactful in the budgeting of the public finances, strategies planned to reduce the
impact of the fiscal deficit in the economy and also re-prioritizing the public spendings so that
the balanced welfare activities can take place. The government has major duty in responding
towards the Covid- 19 situation in the form of the various grants, subsidies, employment
programs, tax payment deferrals and loan guarantee system. So it can be assessed that the
financial statements auditing in the public sector has somewhere generated the economic and
fiscal efficiency and improved the allocation of the resources and better budgeting development
of the government funds.
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REFERENCES
Books and Journals
Brusca, I. and et.al., 2018. IPSAS, EPSAS and other challenges in European public sector
accounting and auditing. In The Palgrave handbook of public administration and
management in Europe(pp. 165-185). Palgrave Macmillan, London.
De Aquino, A. C. B. and et.al., 2020. Legitimating the standard-setter of public sector
accounting reforms. Public Money & Management. 40(7). pp.499-508.
Hay, D. and Cordery, C., 2018. The value of public sector audit: Literature and history. Journal
of Accounting Literature. 40. pp.1-15.
Mnif Sellami, Y. and Gafsi, Y., 2019. Institutional and economic factors affecting the adoption
of international public sector accounting standards. International Journal of Public
Administration. 42(2). pp.119-131.
Online
The accounting, budgeting and fiscal impact of COVID-19 on the United Kingdom. 2021.
[Online] Available through: <https://www.emerald.com/insight/content/doi/10.1108/JPBAFM-
07-2020-0121/full/html>
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