Effective Reporting to Ensure Survival
As we approach the end of the financial year, there is going to be increasing scrutiny on company results, especially given the current economic climate.
It’s ironic that so much importance is attached to the auditors report, given that it is reporting on figures that are potentially months old. However, it is one of the few occasions that an auditor formally gives an opinion on the business - whether the accounts show a true and fair view of the business and whether there is any ‘emphasis of matter’ that should be brought to the attention of shareholders.
It is the latter ‘emphasis of matter’ that gives the opportunity to flag up any concerns. Given the current nerves around the market, great care needs to be taken over such reports – to ensure that lines of credit aren’t snatched away from the company being reported on, but also to ensure that the auditor doesn’t put itself in danger of later being accused of hiding material matters if the company gets into difficulty.
What is clear is that organisations need to plan and reforecast continually to ensure business health/survival and sufficient cash to run the business. Looking at the annual report, companies may not go out of business for having insufficient profits, but they may go out of business for having insufficient cash.
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