BusinessCompany NewsOn the money with Gavin Hinks

On the money with Gavin Hinks

The old going concern warnings are starting to come in. But the issue seems to have reversed itself, as so much has in recent weeks and months as the credit crisis does its damage

gavin hinks accountancy age

The previous problem was that auditors were too afraid to issue going concern
statements because the statement itself could trigger the collapse of the
company.

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
statement.

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
everyone.

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
business.

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
bank.

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

Related Articles

BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

3m Emma Smith, Managing Editor
CVR Global appoints partner in London office

Company News CVR Global appoints partner in London office

7m Alia Shoaib, Reporter
FTSE100 failing to provide adequate ethics information

Company News FTSE100 failing to provide adequate ethics information

7m Alia Shoaib, Reporter
Moore Stephens recruits new private client partner

Accounting Firms Moore Stephens recruits new private client partner

10m Emma Smith, Managing Editor
Magma Group announces merger, partner promotions

Accounting Firms Magma Group announces merger, partner promotions

10m Emma Smith, Managing Editor
BDO on ‘recruitment spree’ with multiple partner appointments

Accounting Firms BDO on ‘recruitment spree’ with multiple partner appointments

10m Emma Smith, Managing Editor
Brand strength leads to fee income growth for RSM

Accounting Firms Brand strength leads to fee income growth for RSM

10m Emma Smith, Managing Editor
Mazars strengthens audit team with partner appointment

Accounting Firms Mazars strengthens audit team with partner appointment

10m Emma Smith, Managing Editor