The Collapse Of Hih – Solvency And Audit Risk
The Collapse of HIH – Solvency and Audit Risk
Following the collapse of HIH, considerable debate, comment and speculation have arisen regarding whether and at what point HIH became insolvent. When a company is close to insolvency, the risk associated with auditing that company is considerably higher than for one that is solvent. This report investigates methods of determining insolvency, the roles of directors and auditors, and the level of audit risk associated with HIH prior to its collapse.
There is general agreement that the concept of solvency relates to having the capacity to meet debts as they fall due. An insurance company is solvent if it is able to fulfil its obligations under all contracts at any time (or at least under most circumstances). However, assessing solvency can be a challenge, as accurate estimates of the liabilities at the balance date may be difficult to determine.
Analysis of company solvency can be made from two indications: financial indications and......
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Approximate Word Count: 1405
Approximate Pages: 6 (250 words per double-spaced page)
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