Effects of COVID-19 pandemic over the financial ratios and key audit matters in the context of ifrs airlines

This thesis focuses on the effect of COVID-19 pandemic over the liquidity, solvency, and profitability ratios in terms of financial situation and financial performance of selected airlines and over the key audit matters of those airlines. In this regard, it considers airlines adopting International Financial Reporting Standards and International Standards on Auditing. It also analyses the general perspectives on international auditing in the airline industry. In the context of financial ratios, it considers (1) pre-COVID-19 period to observe the general trend of liquidity, solvency, and profitability ratios in the pre COVID-19 period in the airline industry, (2) during COVID-19 period to observe the change in liquidity, solvency, and profitability ratios due to the effect of COVID-19 in the airline industry and (3) post-COVID-19 period to observe the change in liquidity, solvency, and profitability ratios due to the recovery from COVID-19 in the airline industry. In this regard, results reveal that liquidity, solvency, and profitability ratios were negatively affected not only by COVID-19 due to loans borrowed, but also by the capitalization of operating lease liabilities in accordance with IFRS 16 that entered into force right before COVID-19. The sharp decline in net sales is a particular indicator to clearly state the negative effect of COVID-19 over the airline industry due to the cease of flight operations. In the context of general perspectives on international auditing, it observes the globally adopted standards on auditing, audit firms, auditor types, auditor rotation, and audit opinion in the airline industry in terms of pre-COVID-19, during COVID-19 and post-COVID-19 periods. The auditors of most airlines adopt International Standards on Auditing. Financial statements of most airlines are audited by international audit firms and particularly by Big-4 audit firms. Auditor rotation is in effect. Single auditor is essential except for the requirement of joint auditor in France. Audit opinions are mostly unqualified opinion. In the analysis, research indicates that one airline got a disclaimer of opinion due to COVID-19. In the context of key audit matters, it considers (1) pre-COVID-19 period, (2) during COVID-19 period to observe the change in key audit matters due to the uncertainty effect of COVID-19 in the airline industry and (3) post-COVID-19 period to observe the differentiation in key audit matters due to recovery from COVID-19. Research reveals that frequently observed key audit matters in the airline industry refer to revenue recognition, aircraft assets and other property, plant, and equipment, lease accounting, and hedge accounting. The ranking of these matters varied from one period to another due to uncertainty experienced in COVID-19 period. The specific key audit matter for the case of COVID-19 is the questioning of going-concern assumption in airlines in terms of financial health and survival.Further research is to analyze the effect of the conflict between Russia and Ukraine over the liquidity, solvency, and profitability of affected airlines due to the cease of flight operations from and to Russia, and even China.