Tariffs, Trade and the Auditor’s Role: Navigating Financial Uncertainty with Judgement and Standards

Recent tariff measures introduced by the US administration are reshaping the landscape for globally exposed businesses. Post Covid, the companies grapple with rising costs, disrupted supply chains and shifting pricing models.

Auditors globally face a parallel challenge: understanding how these changes impact financial statements and what that means for audit risk.

In a high-volatility environment, auditors must move beyond traditional compliance checklists.

Risk assessments, reporting accuracy, and audit quality now depend on a deeper awareness of the macroeconomic context-and a disciplined application of professional standards.

In this blog post we will explore:

Why do tariffs matter to auditors?
Key financial reporting and audit areas affected by tariffs
Applying professional scepticism in a high-risk environment
Disclosures and post-balance sheet considerations
How CapacityHive supports audit firms in volatile times
Where the auditor adds value

Why do tariffs matter to auditors?

Tariffs affect more than just pricing. They alter how businesses forecast revenues, manage liquidity, reconfigure operations and assess future profitability.

For auditors, this triggers heightened risks in key areas like going concern, impairment, revenue recognition and financial disclosures.

The audit response must adapt accordingly, anchored in a sound understanding of international standards.

Key financial reporting and audit areas affected by tariffs

Tariffs introduce both direct and indirect risks to financial statements. These risks must be evaluated not just at the year-end but throughout the audit process-from planning to opinion formulation. The table below summarises the critical impacts and auditor considerations.

Summary of tariff impacts across key standards

Area	Relevant Standards	Potential Impacts	Auditor Focus
Business understanding	ISA 315 (Revised)	New supply chain risks, trade exposure	Broader environmental risk assessment, including geopolitical factors
Going concern	IAS 1, ISA 570	Weakened cash flow, tighter lending	Assess cash flow forecasts, consider stress testing and material uncertainty
Asset impairment	IAS 36, IAS 2	Reduced margins, lower demand	Reassess CGUs and valuation assumptions
Deferred tax assets	IAS 12	Profitability affects recoverability	Test revised forecasts and recognition criteria
Revenue recognition	IFRS 15	Contract changes and penalties	Review performance obligations, variable consideration and timing adjustments
Share-based payments	IFRS 2	Uncertainty around achieving performance conditions	Verify modifications and ensure accurate accounting
Hedging and derivatives	IFRS 9, IFRS 7	Use of financial instruments to manage volatility	Evaluate hedge designation, effectiveness and disclosure
Post-balance sheet events	IAS 10	Tariffs imposed after year-end	Determine adjusting vs non-adjusting events, review disclosures
Disclosure and reporting	IAS 1, ISA 700, ISA 706	Heightened uncertainty	Ensure transparency around risks, assumptions and mitigation plans
Audit evidence and judgement	ISA 500, ISA 230	Estimates under pressure, greater management bias risk	Obtain robust evidence, validate management assumptions and document thoroughly

Applying professional scepticism in a high-risk environment

Under ISA 240, auditors must be alert to fraud risk, especially when pressure mounts to meet financial targets. This includes scrutinising management assumptions that underpin forecasts, share-based payment valuations and impairment models.

For example, under IFRS 2, non-market vesting conditions should only affect accounting if the conditions are modified, not merely because achieving them has become less likely.

Tariffs can also lead to changes in contracts that affect the timing and measurement of revenue under IFRS 15. If customer penalties, rebates or pricing clauses are introduced, auditors must consider how performance obligations and variable consideration are re-evaluated.

When liquidity or profitability is affected, companies may also use derivative instruments to hedge against currency or commodity risk.

Under IFRS 9, hedge accounting is only applicable if formal documentation and effectiveness testing are in place. Economic hedging alone is not sufficient.

Disclosures and post-balance sheet considerations

In periods of significant uncertainty, disclosure quality becomes critical. Entities must clearly communicate their exposure to tariffs, the assumptions underpinning their forecasts, and how management is responding.

Auditors should ensure consistency between board strategy discussions (as evidenced in minutes) and what appears in the financial statements.

One technical nuance worth noting is the treatment of post-balance sheet events.

Under IAS 10, a newly announced or enacted tariff is considered an adjusting event only if it relates to conditions existing at the balance sheet date.

Otherwise, it is a non-adjusting event but may still require disclosure if material to users.

Where the auditor adds value

Auditors must not only ensure compliance with the letter of accounting and auditing standards, but also demonstrate sound professional judgement.

The ability to link macroeconomic disruptions to financial statement assertions is now a core part of audit quality.

This requires deeper planning, stronger evidence, and clearer communication with those charged with governance.

How CapacityHive supports audit firms in volatile times

In this rapidly changing audit landscape, the ability to flex audit teams without compromising quality is more valuable than ever.

At CapacityHive, we help firms scale their audit capabilities with technically skilled professionals who understand both the standards and the strategic context.

Whether you’re preparing for a complex year-end or managing a growing client base with global exposure, our team supports:

Audit planning, including risk identification and ISA-compliant documentation
Financial statement review and technical memo drafting
Testing impairment models, cash flow forecasts and revenue contracts
Evaluating hedge effectiveness and derivative disclosures
Providing research and analysis for adjusting vs non-adjusting events

We are not a generic outsourcing platform- we are a capacity building partner for forward-looking audit firms.

If your firm is preparing for a more complex audit season or navigating cross-border client risks, talk to us about how we can strengthen your team and safeguard audit quality.