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ASX-listed companies had more going concern warnings highlighted by independent auditors in 2013 than during the GFC, according to a report released by CPA Australia.
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One-third of listed companies in 'serious financial strife'
24 September 2014
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According to the report, there is an increasing trend in going concern-related audit reports for the period 2011–2013 with a peak in 2013 of 33.32 per cent, well above the 22 per cent recorded during the GFC.
Going concern ‘emphasis of matter paragraphs’ are used by independent auditors to flag significant uncertainty in an individual company’s ability to continue in business for the foreseeable future, said CPA.
Chief executive, Alex Malley, said the extraordinary findings were a sobering reminder of the fragility of the Australian economy and the challenges many businesses face.
"We’ve been talking about the potential impacts of the slow down in China, the strength of the Australian dollar and the effects of the tapering mining boom on the economy for some time.
“Now, this report, compiled based on virtually all companies listed on the ASX, shows these economic factors are being felt across the market and are putting almost a third of ASX-listed companies at risk of financial catastrophe.
“It really begs the question how our economy would be placed were we to face another shock like the GFC?”
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Mr Malley said the data revealed that going concern warnings had risen most sharply in the energy and mining sectors, where over 40 per cent of companies were judged at risk in 2013.
“It underscores the simple reality that we have not done enough to fill the void the end of the boom is already leaving in our economy or to address the competitiveness challenges that lay ahead for our nation.
“With nearly a third of companies now having a cloud over them in terms of their financial future, the task is urgent," Mr Malley said.
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