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  • Sharman Inquiry
Going concern is clearly an issue that bears strongly on the credibility of accounting information and the confidence that users are able to derive from it. All practicable steps must be taken by boards and auditors to ensure that when the going concern basis is used to prepare a set of accounts it is appropriate to do so.
—Sue Almond, technical director, ACCA

- Calls made for an international approach to going concern assessments and disclosures - Significant recommendations have been made for instilling new discipline into financial reporting, says ACCA

ACCA (the Association of Chartered Certified Accountants) today welcomes the long-awaited recommendations of the Sharman Inquiry, prepared for the Financial Reporting Council (FRC). 

Sharman’s final report contains significant recommendations for instilling new discipline into the assessments of going concern by boards and auditors. 

On the company side, audit committees would be required to report to shareholders on the material risks to going concern that they have considered and addressed. Sharman also proposes that auditors be expected to adopt an explicit responsibility to consider and comment on directors’ disclosures about how they have carried out the going concern assessment. 

Sue Almond, technical director at ACCA says: 'Going concern is clearly an issue that bears strongly on the credibility of accounting information and the confidence that users are able to derive from it. All practicable steps must be taken by boards and auditors to ensure that when the going concern basis is used to prepare a set of accounts it is appropriate to do so.

'Sharman’s recommendations emphasise the importance of going concern in the work of audit committees and auditors, so that they are appropriate and consistent with the direction of work which is already on-going within the FRC and the IAASB (The International Auditing and Assurance Standards Board).'

ACCA particularly welcomes Sharman’s proposal to pursue a common international approach to the going concern assessment itself and the disclosure of information about it, by means of adoption of these issues into the agendas of the bodies responsible for International Financial Reporting Standards (IFRS) and International Standards in Audit (ISAs). 

Sue Almond concludes: 'This would be a positive approach and one which would contribute significantly to improving investor confidence. Going concern is such a fundamental element of the understanding of financial reporting that it makes sense for it to be the focus of such international collaboration.'

ACCA also notes the report’s comments about the importance of the quality of prudence when making assessments. ACCA supports this position but considers that IFRS provides sufficient scope for directors and auditors to make their assessments in a way which is consistent with the concept of prudence. IFRS specifically requires that the appropriateness of the going concern basis is considered and there are provisions requiring disclosure of material uncertainties about going concern. 

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For more information, please contact:

Helen Thompson, ACCA Newsroom
+44 (0)20 7059 5759
+44 (0)7725 498654
helen.thompson@accaglobal.com 

Notes to Editors

  1. ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. 
  2. We support our 154,000 members and 432,000 students in 170 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of over 80 offices and centres and more than 8,400 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence. 
  3. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.