London Stock Exchange
Going concern opinions (GCO) grew rapidly among companies headquartered in the British Isles during FY2019. The COVID-19 pandemic drove the increase. The UK audit regulator, the Financial Reporting Council (FRC), issued a Bulletin in March 2020 concerning COVID-19. The regulator noted that “given the current uncertainty and volatility, that more companies and auditors may need to consider reporting on material uncertainties.”
Audit firms also faced added scrutiny due to high profile failures like Carillion. Additionally, companies faced uncertainties due to Brexit.
These factors led to the percent of GCOs rising to all-time highs in four of the five British Isles jurisdictions during FY2019.
The UK is the largest of the British Isles jurisdictions. Nearly 1,500 companies are headquartered in the UK and listed on EU exchanges.
Between 7% and 8% of UK companies received GCOs between FY2012 and FY2017.
GCOs peaked during FY2019 at 15.3%. Although GCOs declined during FY2020, they were still elevated relative to the mid-2010s.
Ireland is the only jurisdiction in this analysis unaffected by Brexit. The smaller Irish population of about 60 companies per year saw a slightly different trend than the rest of the British Isles.
Notably, there was a significant rise in GCOs during FY2018 instead of FY2019. This was led by mining and oil and gas companies which accounted for five of the seven companies that received a new GCO during FY2018.
The Crown Dependencies saw an increase in GCOs during FY2019 comparable to the UK. Otherwise, the jurisdictions each had a fairly different trend over the last decade. The smaller populations of the Crown Dependencies mean slight variations and result in more volatility.
Guernsey has the largest population of these jurisdictions, with over 100 companies filing audit reports per year. Over 80% of Guernsey companies are in the finance and insurance industry. The rise in GCOs during FY2019 included companies in a variety of industries.
The number of GCOs in both Jersey and Isle of Man companies were mostly flat. However, the number of companies declined. There were over 60 Jersey companies during the mid-2010s, but less than 50 during FY2020. Additionally, there were more than 40 Isle of Man companies during the early 2010s and just 21 during FY2020.
Data used in this analysis obtained from the Audit Analytics Europe – Audit Opinions database.
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