FRC warns auditors over credit crunch

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Ongoing liquidity problems mean entities with exposure to the financial markets face an increased risk of material misstatements, according to the FRC. The council has expanded its area of concern outside the financial sector to include any business that could be affected by current market conditions.

In a January bulletin, it flagged the going concern and the valuation of investments as specific risk areas. As expiring financial arrangements prove difficult or impossible to replace, the going concern assumption faces serious consequences. Similarly, as many financial investments will be experiencing severely curtailed trading (or none at all), balance sheets will also come under strain.

Past experience of obtaining necessary financing cannot be relied on alone to provide sufficient evidence...

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