The Sharman Panel of Inquiry, established by the Financial Reporting Council, has published its final report: Going Concern and Liquidity Risks: Lessons for Companies and Auditors.
This report recommends that the FRC:
- takes a more systematic approach to learning lessons relevant to its functions when significant companies fail or suffer significant financial or economic distress;
- takes steps to clarify the purposes of the ongoing concern assessment and disclosure process;
- reviews its 2009 guidance for directors on going concern and liquidity risks to ensure that the going concern assessment is integrated with the directors’ business planning and risk management processes and focuses as appropriate on both solvency and liquidity risks;
- integrates going concern reporting with the proposals made by the FRC in relation to Effective Company Stewardship – Enhancing Corporate Reporting and Audit, a paper published in January 2011 which makes recommendations aimed at improving dialogue between company boards and their shareholders; and
- considers moving UK auditing standards towards an explicit statement in the auditor’s report on the directors’ going concern assessment process and its outcome.
The Panel also looked at whether a special going concern disclosure regime was required for banks and has concluded that this should not be necessary.
For a copy of the report, click here.