The Malta Association of Credit Management said the time may have come to employ forensic accountants to audit corporate financial accounts whenever needed.

The association was asked to comment on the recent ruling on a case instituted by Price Club creditors Valle del Miele against the supermarket chain’s auditors Deloitte and Touche (as they then were), which found the auditing firm “negligent” but did not award damages.

The ruling also suggested that businesses should not rely on audited accounts alone when extending credit, which then begged the question: “Then on what should businesses rely?”

MACM director general Josef Busuttil said that the first problem was getting hold of financial reports, as these were often filed late, if at all, with the penalty for delays not being used to any effect.

He also pointed out that far too many companies in Malta qualify as ‘small’, since they meet two of the three criteria in the Companies Act to qualify for the submission of only abridged accounts.

“Whoever is involved in the field of credit management knows that abridged accounts offer very limited financial information, and limited financial information simply means less transparency and lack of full financial disclosure, leading to a higher degree of risk exposure when making credit decisions,” he said.

He stressed that reliable corporate financial statements and auditors’ reports were invaluable to creditors who are after clarity and accuracy in the audited accounts and in the operation of the business, in order to compare potential credit investments and assess risks involved when granting and managing credit.

“But reliable and full financial disclosure is not only required for credit management purposes. Corporate financial transparency makes it easier for the business owners and directors to determine where they stand in relation to their peers.”