Minor change in number of going concern opinions for public companies

The number of going concern opinions for public companies declined in 2010. Here is some good info for those of us outside the SEC world to learn what is going on beyond our field of vision.

Here is the recent trend, according to the article Going Concern Opinions Trail Off in 2010, at Compliance week, which is quoting a report from Audit Analytics:

  • 2003 – 2,552
  • 2007 – 3,300
  • 2008 – 3,328
  • 2009 – 2,994
  • 2010 – 2,875

How significant is that trend? Not that big of a change.

Since the above data is for public companies, I wanted to put it into perspective. I wondered how many public companies are listed. Found one webpage that quotes a number of 17,000 from many sources. The Audit Analytics home page says there are over 20,000. Let’s go with the 20,000 estimate.

So the change from year to year is rather small in relation to 20,000 public companies:

  • an increase of 28 during 2008 which seems to be a small increase for the worst year in the recession and the liquidity crisis in the fall of 2008;
  • a decline of 334 in 2009 which makes sense considering the official end of the recession was in the summer of 2009; and
  • a decrease of 119 in 2010.

From 2003, which is the low of the last decade, to the high of 2008 is an increase of 776, which is 3.9% of public companies. From the peak of 2008 through 2010 is a decline of 453 going concern opinions.

Last step I took in looking at the trend is to calculate the number of going concern opinions as a percent of publicly traded companies (20,000 as mentioned above and assuming no change in the number of public companies):

  • 2003 – 12.8%
  • 2007 – 16.5%
  • 2008 – 16.6% (rate is up 3.9% from decade’s low)
  • 2009 – 15.0%
  • 2010 – 14.4% (rate is down 2.4% from peak)

An improvement? Yes. A major change? I don’t think so.

What’s new in this picture for me? I’m surprised how many going concern opinions there are for public companies, how small the change was from 2003 to 2008, and how small the improvement has been in the last two years.

(Hat tip: first, Going Concern and then, CPA Letter Daily)

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