Auditors 'to focus on recession-related risks'

News Article - 03 March 2008
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Audit committees will be focused on any aspect of management reporting that may be affected by the current recession, it has been reported.

Making his comments to the fourth annual Audit Committee Issues Conference, KPMG's global head of audit Henry Keizer added that risks such as liquidity, capital and cash management are areas of concern this year, especially in management reporting.

KPMG's Audit Committee Institute director Edward Smith added that the economic downturn coupled with the sub-prime lending crisis has put "tremendous pressure" on businesses and audit committees are paying more attention to corporate reports.

"The pressure to maintain performance and meet expectations during an economic downturn, carries with it some increased risks, such as the risk of earnings management and overly aggressive budget-cutting," he said.

A survey of the conference attendees found that 18 per cent believe the risks identified by management reporting are of no use and a further 44 per cent claimed they need improvement.

In January, Andrew Ratcliffe, audit partner at PricewaterhouseCoopers, told the Financial Times that auditors will be demanding extended details to financial reports this year, as a result of the country's liquidity crisis.

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