A recent report of preliminary findings issued by CPA Australia paints a rather bleak picture of the Australian economy. There were more going concern warnings highlighted by independent auditors of ASX listed companies in 2013 than following the global financial crisis in 2009, with almost a third of companies in serious financial strife in 2013. CPA Australia Chief Executive Alex Malley has described the findings as a sobering reminder of the fragility of the Australian economy and the challenges many businesses face.
CPA Australia has released Audit Reports in Australia 2005 – 2013: Preliminary Findings (Report) which provides a preliminary summary of nearly 16,000 annual reports, representing around 98% of the companies listed on the ASX over the period from 2005 to 2013, focussing on auditor reporting in the most recent period from 2011 to 2013.
The report indicates that there has been a steady increase in going concern “emphasis of matter” paragraphs (which are used by auditors to flag significant uncertainty in a company’s ability to continue in business for the foreseeable future), particularly in the bottom end of the market. Almost a third of companies were subject to an emphasis of matter warning in 2013, rising from 13% in 2006 and 22% in 2009 following the global financial crisis.
While the increase was seen most sharply in the mining and energy sectors (where almost 40% of companies were judged at risk in 2013), consumer staples, healthcare, industrials and utilities all experienced an increase in going concern warnings in 2013. The financial services sector appears to have the lowest prevalence of going concerns emphasis of matter paragraphs.
See media release dated 24 September 2014.