PracticeConsultingEuro audit concern

Euro audit concern

FEE demands auditors examine clients for euro capability to gain clean bill of health. Phillip Inman reports.

Auditors must examine the impact of the euro on clients before giving them a clean bill of health, according to European accountancy body FEE.

FEE said the euro is likely to alter the way many companies carry out their business earlier than the 2002 switch-over from national currencies.

Companies that take advantage of the UK opt-out and delay the decision to accommodate the euro could still be forced by suppliers, customers or the competitive environment to switch at an earlier date, it added.

The effect on the financial statement could be disastrous.

Noel Hepworth, euro project controller for FEE, said: ‘Without the capability to operate in euros, companies are unlikely to remain going concerns.’

He said the euro could affect the liquidity of a company that had failed to develop arrangements to deal with euro transactions and debtors operating in euros. It could also affect IT systems developments, financing costs and result in a loss of market share to rivals that have planned for the euro.

The decision to highlight the need for checks followed a debate last year on the responsibility of auditors to question clients about any problems they might have in sorting out the millennium bug.

Critics of the audit profession called on auditors at the time to make their own assessments of millennium bug and euro problems, but FEE said auditors’ responsibilities for the euro did not extend that far.

‘The professional duties of the statutory auditor do not include an assessment of the entity’s exposure to the possible adverse consequences of the introduction of the euro.

‘The impact of the euro, however, is unlikely to match the potentially disastrous consequences of ignoring the millennium bug,’ said Tony Bingham, head of practice development at Coopers & Lybrand.

‘It is not as serious a going-concern issue as the millennium bug. It is more of a strategic topic than a systems issue. But it is entirely reasonable that auditors ask the management what impact the euro will have on their business – and if they don’t receive a satisfactory answer, raise their concerns.’

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