More warning needed about company failures

Empty-pocketAuditors should give investors a warning if a company is about to go bust, a UK fund management trade body says.

Auditors should state any doubts over the company’s ability to continue as a going concern, regardless of whether the information has been disclosed by company management, said the Investment Management Association (IMA) last week.

The IMA was commenting on proposals put forward by the International Auditing and Assurance Standards Board about auditor’s reports and how to make them more relevant and useful for investors.

“Currently investors are concerned about the quality of audits and feel excluded from the process and real findings, such as the evaluation of risk and controls. They would value a more far-reaching audit report,” said Liz Murrall, IMA director of corporate governance and reporting.

Investors want more assurance from the auditor on the going concern assessment – the underlying assumption in the preparation of the financial statements that the business is not about to go broke, said the IMA.

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