Regulator launches ‘going concern’ review

AN INQUIRY has been launched into the use of ‘going concern’ judgements during the crisis, the UK’s financial reporting regulator has announced.

Led by Lord Sharman, the former head of KPMG, the inquiry will look at the lessons to be learned from the experience of directors and auditors who have faced tough going concern questions during the credit crunch.

Financial Reporting Council chairman Baroness Hogg acknowledged that going concern continues to be a ‘critical’ issue despite guidance being issued by the regulator two years ago.

She said: “Although credit markets have since stabilised, going concern and liquidity risk continue to be critical corporate reporting and audit issues.

“In launching this inquiry, our aim is to ensure the lessons of the recent past are captured, our guidance developed as necessary and best practice in dealing with a range of related issues shared widely.”

It was in December 2008 when the FRC moved to avert what many expected to be a going concern crisis as the credit crunch took hold in the UK.

Fearing a swathe of negative going concern reports from auditors the FRC cautioned that companies did not require confirmation of credit lines to continue as going concerns.

Experts later debated whether going concern remained a relevant principle of business for companies.

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