The independence of auditors could be at risk, the Financial Reporting Council has warned, if they are seen as being too close to their clients during the credit crunch.

The warning comes in a report from the FRC and is the latest in a long line of alerts drawing attention to the responsibility of auditors dealing with businesses affected by the credit crunch and urging caution as they carry out audits.

‘The so-called credit crunch may increase the risk of material misstatement in the financial statements of some entities,’ Richard Fleck, APB chairman, said.

'This bulletin has been prepared to assist auditors in being alert to issues relating to the availability of finance and the valuation of some assets for balance sheet purposes and, thereby, to help them complete their current audits with appropriate rigour.’

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