In the past few years, the EU has been hit with several high-profile corporate failures and collapses: Carillion, Thomas Cook, Patisserie Valerie. Corporate failure affects not only the related shareholders, but also the confidence the public has in the sustainability of the overall market. Supply chain, demand fluctuations, and unseen shifts in consumer behavior as a result of COVID-19 have disrupted the global market and put many companies in positions where future sustainability may be uncertain.
Given this environment, it is extremely important that regulators ensure disclosures of and surrounding going concern are appropriate and give financial statement users the information needed to make informed decisions.
In response to these concerns, Accountancy Europe recently released Going Concern: Recommendations to Strengthen the Financial Reporting Ecosystem.
Leveraging the Audit Analytics Europe Audit Opinions database, the policy group examined how going concern was disclosed across a spectrum of reporting entities and analyzed how effective these disclosures were in meeting financial reporting goals.
The report presents the following 10 recommendations for ways to strengthen the financial reporting framework:
- Broaden Companies Work Effort
- Mandate Disclosure on Companies’ Risk Management Systems on Going Concern and Expand the Auditor’s Involvement
- Mandate Going Concern Disclosure Even if No Uncertainties
- Change in Mindset, Transparency and Communication
- Mandate an Audit Committee in Each Public Interest Entity
- Clarify and Harmonize the Period for Going Concern Assessment
- Broaden Auditors’ Area of Consideration and Work Effort
- Make Early Warning Mechanisms for Auditors Effective
- Assessing Companies’ Longer-term Viability and Resilience
- Interconnecting Financial and Non-Financial Information
In a rapidly changing environment, access to timely, relevant, and accurate data is instrumental to making better, more informed decisions.
Audit Analytics is a recognized leader in providing high-quality accounting, audit, and disclosure data. Accountancy Europe’s report showcases not only the power of this data, but also how clients can use this data to derive informed insights and implement global change in the public market.
For more information about Audit Analytics or this analysis, please contact us.
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