BusinessBusiness RecoveryGoing concern warnings put business at risk

Going concern warnings put business at risk

Transparency in business could cause market volatility

Accountants have warned the number of businesses receiving going concern
warnings from auditors could rise following the end of the recession putting
businesses at risk.

Fears have been exposed that misunderstandings around queries on a company’s
going concern status may cause market reaction and push the company into
difficulty the
Financial
Times
reported.

Going concerns are made by the directors and auditors that a company can
continue to trade as normal, usually for the next 12 months.

John Flaherty, managing partner of assurance Ernst & Young told the
Financial
Times
, investors and companies have an emotional reaction to the expression
“going concern”.

“But it is much better to be disclosed to the market in this way than for the
market to find out [about corporate difficulties] six months later,” he added.

Further reading:

Going
concern clarifications pose problems for UK plc

Auditors
issue Vantis going concern warning

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