Is UK plc a going concern?by
The Imprudent Accountant suggests that this might be a time to get prudent rather than re-opening the office.
I might go by the soubriquet of The Imprudent Accountant but when the chips are down, I am an accountant and understand the need to take a cautious approach when faced with a tricky situation.
Therefore, I have been most surprised over the last week to hear government ministers suggesting that they will take decisions based on the kind of ethic usually recognisable as the overpowering weakness of a problem gambler.
An auditing analogy might help readers to understand the issue, even those whose last connection with an audit occurred in a theoretical exam decades ago.
Let us imagine a scenario where our practice has a client who has been in financial difficulties for a few years. On an annual basis, when we carry out the audit, it is necessary to obtain written assurance from their bankers to the effect that they will continue to finance the company and not pull the plug.
In the year under review, due to coronavirus, the company has breached its banking covenants by failing to meet a number of loan repayment obligations, at the same time borrowing significant amounts from government schemes and maxing out its overdraft.
As always, we send off a letter to the bank asking for comfort but when it comes to completing the audit, have not had a response.
The choices would appear to be
- Sign off the accounts blind and hope for the best.
- Wait until we have a response from the bank.
- Sign off the accounts with a qualification that the company is not (or may not be) a going concern.
If any reader would go with the first of these options, then they should be ashamed of themselves.
However, that is exactly what the government appears to be suggesting with regard to Freedom Day on 21 June.
Patience used to be a virtue, but now, as the Empire strikes back in the form of an Indian variant of coronavirus, panic seems to be closer to the truth.
Any prudent accountant on being informed that there was not enough data to determine whether this variant was likely to cause mayhem, with large numbers of victims, including unknown numbers that might end up in hospital or dead, would temporarily slam on the brakes.
Instead, both the health minister and our increasingly hyperactive Prime Minister have suggested that since we are completely ignorant of the consequences, we will hope for the best, ie choose the equivalent to option a) above.
If nothing else, you would have thought it might multiple times bitten, multiple times shy as the Ghost of Christmas Past threatens to haunt the country and the powers that be yet again.
Information continues to trickle in regarding the efficacy of the most popular vaccines against this new variant. Despite the spin that the media and the government are attempting to put on the data, this doesn’t look encouraging. In broad terms, where people have had only one dose of vaccine in two-thirds of cases it will be ineffective. For AstraZeneca, even after two doses the current data suggest that 40% of people will not be protected.
That sounds like pretty lousy odds to me, especially given that about half of the country will not have received a second vaccination dose and a significant proportion not even the first one come 21 June.
Everyone will make their own decisions about reopening the office and obliging staff to attend. From my perspective, this is a situation where The Imprudent Accountant is going to be embarrassingly but unashamedly prudent.