The Auditing Practices Board has extended reporting accountants’ duties for assessing millennium bug risks to comfort letters that accompany investment circulars for the financial markets.
The guidance was issued to calm fears among leading practices that the lack of clear rules covering assessments of working capital statements would prejudice merchant bankers and the Stock Exchange.
APB chairman Ian Plaistowe explained: ‘Without authoritative guidance, reporting accountants might unnecessarily qualify their reports to sponsors by referring to year-2000 issues. Sponsors, in their turn, would not be able to issue an unqualified report to the Exchange. In many cases, this would mean the Exchange would consider the company unsuitable for listing.’
The issue mainly concerns larger firms which advise on stock market transactions – the Stock Exchange requires all listing particulars to include a statement about the sufficiency of the company’s working capital, usually backed up by a comfort letter from an accountant.
Under the guidance, auditors should question whether directors have put adequate plans in place to cope with year-2000 disruption in order to provide a solid basis for their working capital projections. They are not required to carry out a detailed technical evaluation.
This is likely to be the APB’s final guidance on year-2000 computer problems.
Its ad hoc working group on year-2000 issues would now be wound up, said its chair, KPMG audit partner John Kellas.
The move has been welcomed by the Stock Exchange.
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