The previous problem was that auditors were too afraid to issue going concern
statements because the statement itself could trigger the collapse of the
And who would want to be responsible for that if someone could claim later
that there was a viable rescue option if only the auditors had held off on the
Now, however, the outlook is different. As the crisis deepens there are
warnings to look out for more going concern statements as auditors stick hard to
the rules and take fewer risks up front. At least they can say they warned
Of course, that’s the criticism of auditors in relation to the critical
problems faced by UK banks that they didn’t wave the red flag early enough.
Looking at the current warnings, it’s not implausible to argue that
sensitivity over banks has spilled over into auditors working in the broader
economy pushing them into thinking they must issue the going concern statements.
The difficulty is that the old problem still persists. Going concern
statements still run the risk of bringing about the end of things for a
Oddly though, despite everyone being strapped for cash, it’s possible to
discern a stigma developing against calling time on a business especially by a
Ironically it was only this week that the
Financial Reporting Council
consultation on directors’ going concern statements was closed.
It had launched a review ostensibly to consider whether changes were needed
given the current climate.
The FRC was probably never more right in that.
Gavin Hinks is editor of Accountancy Age
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