Captain Speaking, Welcome Back Onboard: A case study of the convid-19 impact on audits for the two largest Scandinavian airlines

Abstract

In a broad sense, this thesis offers a contribution to the ongoing analysis of the covid-19 impact on the aviation industry with emphasis on the audit report. In assuming that several features of the FY20 audit changed under the pandemic due to financial distress, I expect to find raised audit fees, changes in key audit matter, and major difficulty related to any GC assumptions for clients. The thesis aims to discuss collected data to find evidence of what the drivers are for changes in audit fees, key audit matters, and auditors’ independence under uncertainty. Lastly, arguments are presented for expected future outcomes with a current events update. In response, I have conducted a case study analysis on the two largest Scandinavian airlines, respectably Norwegian Air Shuttle ASA and Scandinavian Airlines AB. This includes a data analysis over a 20-year horizon collected from public annual reports and a collection of related literature and research. I find evidence that suggest covid-19 to be major influence on FY20 key audit matter and a heighten uncertainty revolving the GC assumption. Mixed evidence is found for the audit fees which indicates that the pandemic is not a sole factor to cause deviations from prior years. This is due to variable and fixed audit costs agreements. Finally, my overall findings suggest further negative impact for years to come when looking at prognoses for changes in market, passenger travel habits, jet-fuel prices, currency exposure, and debt exposure. Though, market analysis suggests that the industry is on a raise and will see improved operating revenue through the summer season of 2022.

In a broad sense, this thesis offers a contribution to the ongoing analysis of the covid-19 impact on the aviation industry with emphasis on the audit report. In assuming that several features of the FY20 audit changed under the pandemic due to financial distress, I expect to find raised audit fees, changes in key audit matter, and major difficulty related to any GC assumptions for clients. The thesis aims to discuss collected data to find evidence of what the drivers are for changes in audit fees, key audit matters, and auditors’ independence under uncertainty. Lastly, arguments are presented for expected future outcomes with a current events update. In response, I have conducted a case study analysis on the two largest Scandinavian airlines, respectably Norwegian Air Shuttle ASA and Scandinavian Airlines AB. This includes a data analysis over a 20-year horizon collected from public annual reports and a collection of related literature and research. I find evidence that suggest covid-19 to be major influence on FY20 key audit matter and a heighten uncertainty revolving the GC assumption. Mixed evidence is found for the audit fees which indicates that the pandemic is not a sole factor to cause deviations from prior years. This is due to variable and fixed audit costs agreements. Finally, my overall findings suggest further negative impact for years to come when looking at prognoses for changes in market, passenger travel habits, jet-fuel prices, currency exposure, and debt exposure. Though, market analysis suggests that the industry is on a raise and will see improved operating revenue through the summer season of 2022.