Tuesday 17 November 2020 12:48 pm

Watchdog lambasts accountants for ‘basic’ cash flow mistakes

The Financial Report Council (FRC) has lambasted the accountancy industry for basic errors in cash flow statements. 

The watchdog said it continues to identify errors in cash flow statements, and as a result has published a review on the subject that examines many of the issues faced in their preparation, and provides information on how cash flow statements can be improved. 

Read more: FRC probes KPMG and PwC’s Eddie Stobart audits

FRC executive director of supervision David Rule said: “It is frustrating that we continue to identify basic errors in relation to cash flow planning which, in most cases, were easily identifiable from a desktop review of the financial statements. 

“We expect companies to perform robust pre-issuance reviews to ensure cash flow statements and related notes comply with the requirements of IAS 7 and are free from errors.” 

Read more: Accounting watchdog floats strengthening auditors’ obligation to spot fraud

The new review also looks into the disclosure of liquidity risk, which is particularly relevant given the backdrop of the coronavirus pandemic and the effect the virus is having on businesses.

The FRC said several companies published their accounts before the UK lockdown in March and many contained only boilerplate disclosures in respect of liquidity risk and related issues. 

The watchdog said there has been an improvement in liquidity risk disclosures from April onwards, although there are still improvements to be made.