The auditor's on-going concern

Article Abstract:

The Auditing Practices Board and the Cadbury Committee on Corporate Governance have both released drafts of proposals increasing the responsibility of auditors by compelling them to report going concern qualifications. Auditors will be expected to report a going concern status once they determine that a large proportion of the distribution of future cash flows is negative. The accuracy of such prediction of failure lies on the nature of the distribution and the point when it is decided that a high possibility of failure exists. However, small investors with undiversified portfolios who will be normally provided with such information may not be able to read and correctly interpret the report. Also, other sources of information on risks such as financial analysts are already available. Other problematic concerns include the predictive ability of going concern qualifications, costs, subjectivity and its effect on the image of a client.

Practice, Auditors, Going concern (Accounting), Going concern

---

Polly Peck: where the analysts?

Article Abstract:

Stock analysts failed to see the danger signals communicated by Polly Peck's 1989 financial statements and continued to issue 'buy' recommendations. The financial statements fully indicated the nature of interest income and exchange results, and the significance of the exchange losses was clearly disclosed in a note to accounts. Indicators of the firm's liquidity crisis were not so clear. There was a diversity in the quality and depth of analysis by various brokers: some made no reference to the significant interest receivable or to the significant variances in exchange, while others mentioned the phenomena but tried to explain them. The majority of analysts failed to uncover the information or adequately understand the significance of the information presented, seemingly making their 'buy' judgments on the information released informally by the company rather than on the formal accounts.

Research, Analysis, Stockbrokers, Stocks

---

Compliance with the letter but not the spirit: could Polly Peck's accounts under any definition be seen as presenting a true and fair view?

Article Abstract:

UK law requires that corporate accounts give a true and fair view of a firm's assets and liabilities. The example of Polly Peck International PLC (PPI) gives rise to the question, what is a true and fair view? There are three schools of thought as to what constitutes a true and fair view: no more than adherence to generally accepted accounting principles; appropriate choices where standards do not cover a situation; and a meaning of true and fair in its own right that goes beyond compliance with extant standards. The management of PPI likely would contend that it adhered to relevant standards when accounting for its exposure in areas affected by hyperinflation, but clearly such an approach failed. The answer might be to make accounting standards more prescriptive and with less leeway in order that financial statement users can more readily identify any departures from the standards.

Great Britain

Similar abstracts:

• Abstracts: The size and incidence of the losses from noise trading. Positive feedback investment strategies and destabilizing rational speculation
• Abstracts: Using a proportional odds model to analyze the factors that influence accounting standard setting lobbying in Australia
• Abstracts: Trading behavior and the unbiasedness of the market reaction to dividend announcements. The pricing of options on assets with stochastic volatilities
• Abstracts: Early debt extinguishment transactions and auditor materiality judgements: a bounded rationality perspective. Inherent risk assessment and audit firm technology: a contrast in world theories
• Abstracts: If you're standing still you're dead! Are the City's analysts being gagged? A taste for independence

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.