Introduction
In the mysterious labyrinth of financial reporting, the Sharman Inquiry shines like a beacon of accountability. Established by the Financial Reporting Council in 2011, this investigation was spurred into action by the unsettling applause auditors gave to entities, which then ironically queued for financial lifelines during the 2007–08 turmoil.
Objectives and Findings
The Sharman Inquiry’s main attraction was its critical examination of how liquidity risks, along with other survival-threatening factors, were torched under the auditor’s magnifying glasses. Like a detective novel with too many villains, the financial saga pre-inquiry had auditors blissfully endorsing the health of banks that were, spoiler alert, on financial life support.
In their gripping 2012 finale, Lord Sharman and his fellow sleuths proclaimed that auditors’ badges should signify more than just rubber-stamping financial statements. Their insights dug deeper, suggesting that assessing an entity as a going concern should transcend beyond the mere appropriateness of applying the going-concern concept.
Recommendations and Impact
Following the report’s cliffhanger, their thought-provoking recommendations were scripted into the Corporate Governance Code. Like a good yoga session, these changes stretched the norms of corporate governance, enhancing the transparency and accountability of financial reporting.
Related Terms
- Liquidity Risk: The drama of potentially not being able to meet financial obligations because the cash is just not there.
- Going-Concern Concept: A thrilling assumption that the entity will continue to operate and not roll down the financial curtains anytime soon.
- Corporate Governance Code: The rulebook directing the symphony of fairness, transparency, and accountability in business operations.
- Financial Reporting Council: The watchdog ensuring that the financial reporting process does not turn into a spoiler-filled storybook.
Further Reading
For those hungry for more financial sagas, consider these riveting reads:
- “Financial Shenanigans” by Howard Schilit & Jeremy Perler — An exposé on the tricks companies use to distort their financial statements.
- “The Audit Society” by Michael Power — A piercing look into how audits shape our understanding of performance and accountability in the corporate world.
In the land of financial regulation, the Sharman Inquiry stands out as a legendary chapter that transformed not just perceptions but practices, ensuring that the only clean bills of health issued are those forged in rigorous and transparent scrutiny.
