Audit committees warned to ask ‘key questions’ in the crisis

Audit committees have been offered new guidance warning them to consider ‘key
questions’ when looking at annual financial statements in the financial crisis.

The guidance, which reiterates existing requirements, says that ‘particularly
relevant in current economic conditions’ is monitoring the integrity of the
financial statements and formal statements about company performance and
reviewing internal controls and risk assessments.

A set of key issues laid out by the FRC including close attention to
liquidity risk and going concern considerations.

The paper says: ‘Audit committees are likely to examine in more detail the
rigour with which the analysis supporting the going concern judgment has been
made and the integrity of the disclosures about going concern in the financial
statements and other market communications.’

Ian Wright, FRC Director of Corporate Reporting, said the ‘initiative is the
latest in a series of actions taken by the FRC and its operating bodies during
2007 and 2008 to help mitigate the increased risk of errors and omissions in
annual reports which have the potential to adversely affect confidence in
corporate reporting. We will continue to monitor developing issues and will be
seeking to help the market whenever possible.’

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