Most business owners and managers would agree that confidentiality is essential to running a successful business.
You don’t want your competitors to know the kind of margins that you have on your goods or services.
You typically don’t share marketing or strategy plans for fear of conferring a competitive advantage to others.
But confidence is critical also. A business must be seen to be a going concern, able to pay its way.
It is this concern about confidence which makes some of the methods of debt recovery used by Revenue against businesses so effective.
Sheriff action, court orders and the power of attachment, which enables Revenue to lay claim to monies owed to a business by others, are sometimes taken as a sign that a business may be in difficulty.
The ensuing loss of confidence is a greater threat than mere monetary penalties and interest charges.
Similarly, the fact that businesses claiming the temporary wage subsidy scheme currently in operation would have their names published on the Revenue website was sufficient to make some think twice about claiming the wage subsidies, despite the benefit of that cash for their business prospects.
Shareholders of a company, however, are entitled to see the audited accounts of the company in which they have invested.
The whole purpose of the annual audit, which a company must undergo, is to provide assurance.
This assurance is primarily for its shareholders but also for other stakeholders like banks that the company’s financial statements are giving a true and fair view of its finances.
The auditor’s report will contain an opinion on whether or not the business is a “going concern”, in other words if its business plan and trading conditions suggest that it can continue to trade successfully into the future.
In normal times this is usually assumed to be the case.
However, offering an opinion on whether a company is a going concern is hugely challenging because of the coronavirus pandemic.
The trading situations which would have been taken for granted as recently as six weeks ago have now changed utterly.
Getting the judgment of going concern right involves both the directors of the company and the accountancy firm which is carrying out the audit.
The directors have to take a call on the viability of the business in the next year which is a hard ask given all the uncertainty generated by the Covid-19 crisis.
For their part, the auditors will have to be prepared to challenge the management’s assessment of the prospects of remaining as a going concern and look for evidence that the business assumptions are reasonable.
If the auditor’s going concern report is qualified with, for example, an uncertainty or an adverse opinion it can become a self-fulfilling prophecy.
Quite often, bank funding and other types of agreements and covenants are contingent on the company having a clean audit report, without which any such agreements can be set aside.
Even without such considerations, the reputational damage of a qualified audit report can be enough to sound the death-knell for a business.
Nevertheless, it has never been more important for audits and all forms of company disclosure to be as accurate and fair as possible.
Irish business will recover from the current crisis.
It will do so all the more quickly if we can sustain confidence in Irish industry.
A fair, credible and reliable audit and reporting regime goes a long way towards sustaining that confidence.