The Auditing Practices Board (the APB) recognises that current economic conditions challenge all involved with annual reports and accounts. The economic environment leads to uncertainty regarding:

1. bank lending intentions and the availability of finance more generally;
2. the impact of the recession on a company’s own business; and
3. the impact of the recession on customers and suppliers.

One consequence is expected to be an increase in the disclosures in annual reports and accounts about going concern and liquidity risk. Auditors will need to ensure that they fully consider going concern assessments and only refer to going concern in their auditor’s reports when appropriate.

To assist auditors to respond to this challenge the APB has today published Bulletin 2008/10 'Going concern issues during the current economic conditions'.

Richard Fleck, Chairman of the APB, commented:

“The current difficult economic conditions do not of themselves necessarily mean that a material uncertainty exists about an entity’s ability to continue as a going concern, or justify auditors modifying their auditor’s report to draw attention to going concern. Auditors should judge the need to draw attention to going concern uncertainties in their auditor’s reports on the basis of the facts and circumstances of the particular entity.”

The Bulletin can be downloaded, free of charge, from the Bulletins section of the APB’s website. Printed copies will be available in early January 2009 (price £8) from:

FRC Publications, 145 London Road, Kingston upon Thames, Surrey KT2 6SR. Telephone: 020 8247 1264. Fax: 020 8247 1124. Email: customer.services@cch.co.uk  Website: www.frcpublications.com  

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The APB is committed to leading the development of auditing practice in the United Kingdom and the Republic of Ireland so as to:
   • establish high standards of auditing;
   • meet the developing needs of users of financial information; and
   • ensure public confidence in the auditing process.
3. The FRC publication 'An update for directors of listed companies: going concern and liquidity risk' is included in the Bulletin as Appendix 1.
4. This Bulletin supplements APB Bulletin 2008/1 'Audit Issues when Financial Market Conditions are Difficult and Credit Facilities may be restricted' which may also be downloaded from the APB’s web site or purchased from FRC Publications.
5. APB will be issuing, before the end of the year, an Exposure Draft of proposed revisions to Practice Note 23 to provide updated guidance on 'Auditing Complex Financial Instruments'.
6. All press enquiries should be directed to Jon Grant, APB Executive Director, on +44 (0)20 7492 2410.