Auditors to examine business health in more depth

News Article - 09 June 2009
Category: Regulatory

Companies will have to provide more evidence to auditors to show they have enough funding for business in 2008, it has been reported.

Andrew Ratcliffe, audit partner at PricewaterhouseCoopers, told the Financial Times that the country's liquidity crisis means that auditors have a whole new set of questions to ask in relation to business performance.

He explained that the effects of the credit crunch have yet to be felt across the whole economy.

Martyn Jones, UK national audit technical partner at Deloitte, said: "Many of the normal assumptions can't be taken for granted so while we always tested them, this year needs particularly high levels of challenges - we are in a new world."

The newspaper reports that for an auditor to approve a firm's annual report, it must issue a company health check for the next year. If any serious issues arise, these will be detailed so that investors are made aware of the problems and can monitor business progress.

Financial reports must be prepared with "increased diligence", according to the Financial Reporting Council, as liquidity challenges have created greater risks.

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