The UK Financial Reporting Committee (FRC) has
launched an inquiry for companies and auditors addressing going
concern and liquidity risks.

The inquiry will focus on the lessons learned
during the financial crisis and will recommend measures necessary
to improve the reporting regime and guidance on going concern and
liquidity risks disclosure.

The inquiry will be lead by former KPMG global
chairman and current Aviva group chair Lord Sharman

FRC Chairman Baroness Hogg
said that
although credit markets have
stabilised, going concern and liquidity risk continue to be
critical corporate reporting and audit issues.

“In launching this inquiry, our aim is to ensure
the lessons of the recent past are captured, our guidance developed
as necessary and best practice in dealing with a range of related
issues shared widely,” Hogg said.

The FRC said the inquiry will focus on:

  • How companies ensure the adequacy,
    timeliness and reliability of the internal information used to
    monitor going concern and liquidity risks
  • How the Board and, separately, the audit
    committee approach going concern and liquidity risks, particularly
    in situations where these issues are of heightened
  • How the consideration of going concern and
    liquidity risk can best be incorporated into other aspects of
    stewardship and reporting,
  • How auditors approach these matters,
  • Whether the existing reporting regime and
    related guidance should be developed.

Lord Sharma said the inquiry will shortly issue a
call for evidence.

The panel of inquiry hopes to receive input
from a wide range of interested parties including executive and
non-executive directors and members of audit committees, the
auditing profession and representatives of shareholders.

Baker Tilly UK audit partner Mark Harwood said
that the FRC’s proposal is to extend the scope of audit
“It’s s a good debate to have particularly in the context of
looking at improving the reporting regime and improving guidance
for companies and auditors,” Harwood added.