n Professional Accountant - Financial distress - the responsibility of the professional accountant (SA) - : accounting technical

Volume 2016, Issue 27
  • ISSN : 1680-7537


Section 128(f) of the Companies Act of 2008 defines financial distress of the business as being reasonably:

(i) Unlikely to meet its debt obligations when they are due within the immediately ensuing six months, and
(ii) Likely to become insolvent within the immediately ensuing six months. The Professional Accountant (SA) has a responsibility to assess the going concern (in terms of the accounting standards) as well as performing the liquidity and solvency test (in terms of the Companies Act) of the business when compiling the financial statements. The question that needs to be addressed is "What are the warnings signs that indicate that a business may be in or heading towards financial distress?"

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