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Auditors cast doubt on asset values of companies
ONE in four financial statements lodged by Australian listed companies were flagged by auditors in the past year, as the global financial crisis cast doubt on asset values and the ability of companies to refinance debt.
Read more »Company Directors face new pressures
Several recent cases run by the Australian Securities & Investments Commission have also brought greater public scrutiny over the roles of company directors and their responsibilities to shareholders.
Read more »Auditors cast doubt on asset values of companies
ONE in four financial statements lodged by Australian listed companies were flagged by auditors in the past year, as the global financial crisis cast doubt on asset values and the ability of companies to refinance debt.
ONE in four financial statements lodged by Australian listed companies were flagged by auditors in the past year, as the global financial crisis cast doubt on asset values and the ability of companies to refinance debt.
According to figures provided by the Australian Securities Exchange, 25 per cent of the 967 financial statements lodged to June 30 - those of 239 companies - contained a modified independent audit report, with most related to whether the company would continue to operate as a "going concern". The figures exclude junior mining companies.
The Australian Securities and Investments Commission will today publish the results of its own review of June 30 audits, as it warns it will be scrutinising compliance with revised accounting standards.
The ASIC commissioner, Michael Dwyer, said the review pointed to a number of areas where auditors and companies "needed to pay greater attention", including asset writedowns, fair value of assets and off-balance sheet exposures.
The ASX figures cover a period in which several companies entered administration and were suspended, including Babcock & Brown, Timbercorp and Great Southern.
A modified audit report means the auditor has decided to include information not contained in a standard report. Most audit modifications are likely to involve an "emphasis of matter" paragraph, which highlights potential problems that may affect a company's status as a going concern - its ability to pay debts and continue operating. A "qualified opinion" is a more serious modification.
According to ASIC, common reasons for "emphasis of matter" paragraphs include negative or minimal net assets, uncertainty over whether the value of a company's assets could be recovered, and an impending requirement to refinance debt.
An ASX spokesman said in four cases over the six months to June 30 auditors of a listed company's statements gave an "adverse opinion" and were unable to sign off on the accounts. Trading in the companies' shares was suspended.
Separately, ASIC will today publish its own figures on modified audits, based on a review of the June 2009 financial reports of 350 entities. It found 18 per cent of the audit reports it reviewed contained an emphasis of matter paragraph.
A year ago ASIC warned directors to pay attention to whether their companies remained a going concern, a message it will reiterate today. It will also examine compliance with revised standards.
Sydney Morning Herald - 11th Jan 2010 - Ruth Williams
