A survey of audit reports showing nearly a third of ASX-listed companies in 2013 have been classified as at risk of “financial catastrophe” should send alarm bells ringing.
The analysis by CPA Australia of almost 16,000 annual reports from listed companies between 2005 and 2013 makes the chilling observation that in 2013 a whopping 11 per cent more listed companies attracted financial distress warnings than during the global financial crisis.
The report, released to Fairfax Media, is based on the findings of independent auditors, who are required sildenafildosage to flag in a company’s annual report if they believe there is “significant uncertainty” in a company’s ability to continue as a going concern.
It comes as iron ore prices fell below $US80 ($90) a tonne, putting a number of smaller high-cost iron ore companies in the financial danger zone. To put it into perspective, two weeks ago iron ore group Desert Resources went into voluntary administration, and if prices stay at these levels or fall further, more companies will fall by the wayside, while others will be forced to intensify cost-cutting strategies and slash jobs.
What is interesting is the big four auditors report a lower percentage of going concern warnings than small audit firms. Whether this reflects the fact that the big four firms audit bigger companies, which are more bulletproof when it comes to a slowdown in the economy, is worth investigating.