1. Introduction 🧐

Have you ever wondered why auditors sometimes seem like those movie critics who rave about the new blockbuster, only for you to find out that the blockbuster is a complete flop? Unsurprisingly, during the 2007-08 financial crisis, the world wondered the same about auditors of major financial institutions. Enter the Sharman Inquiry!

2. The Birth of the Inquiry 🌟

In 2011, fueled by a gigantic bowl of skepticism soup, the Financial Reporting Council (FRC) decided it was high time to look into how auditors were giving out clean bills of health to several entities who were seemingly as healthy as a couch potato attempting a marathon. The focal point? Liquidity risk and viability as a going concern.

3. Call in the Detectives 🔍🕵️‍

The FRC hired their Sherlocks, with Lord Sharman playing lead crime investigator. Packed with magnifying glasses, spreadsheets, and VAT-inclusive calculators, they ventured into the audit minefield. Their mission: To ensure auditors didn’t mistakenly hand out hall passes to faltering banks and other financial gurus.

4. Findings That Shook the Financial World 🌍🏦

In 2012, Lord Sharman et al. released a report that could rival any scandal-laden TV show. Their key thesis: An auditor’s judgment about an entity’s ongoing viability should involve more than just checking off the going-concern box on their to-do list. Imagine assuming a car is roadworthy because it still has four tires on it. Yeah, wrong approach.

5. The Going-Concern Concept 🚗💨

According to dear Sharman, assessing whether the going-concern concept was apt needed broader scrutiny. Auditors should peer into their crystal balls and view the long-term viability and looming threats to the business rather than just short-term liquidity snapshots. Say goodbye to tunnel vision!

    flowchart TD
	    A[Financial Reporting Council] --> B[Sharman Inquiry Starts]
	    B --> C[Auditors' Judgment Process]
	    C --> D[Going-Concern Concept]

6. Implementation into the Corporate Governance Code 📜⚖️

The Sharman Inquiry’s recommendations were soon knighted and inducted into the prestigious Corporate Governance Code. Corporate boardrooms now bustled with terms like ’long-term viability’ and ‘stress-testing’ - and presumably fewer mentions of the office espresso machine breakdowns.

7. Conclusion 🎉🔚

The Sharman Inquiry was not just a magnified scrutiny but a crusade to fortify auditing processes. A firm handshake with robust corporate governance practices, it ensured companies couldn’t merely drunk Instagram themselves into oblivion without audit checks spot lighting potential pitfalls longer-term. Bravo, Lord Sharman!

🎯 Quizzes: Test Your Sharman Savvy!

1. The Sharman Inquiry was set up by which organization?

• Choices: Financial Reporting Council, Securities and Exchange Commission, Institute of Chartered Accountants, International Monetary Fund
• Correct Answer: Financial Reporting Council
• Explanation: The Financial Reporting Council (FRC) set up the Sharman Inquiry in 2011 following the 2007-08 financial crisis.

2. What year did the Financial Reporting Council set up the Sharman Inquiry?

• Choices: 2008, 2010, 2011, 2013
• Correct Answer: 2011
• Explanation: The FRC initiated the Sharman Inquiry in 2011 to address failings identified during the financial crisis.

3. Who led the Sharman Inquiry?

• Choices: Lord Sharman, Baron Sharman, Lord Sherlock, Baron Audit
• Correct Answer: Lord Sharman
• Explanation: Surprisingly, Sherlock wasn’t involved! Lord Sharman led the inquiry investigating the auditors.

4. Which risk factor was a focus of the Sharman Inquiry?

• Choices: Market risk, Latent risk, Financial statement manipulation risk, Liquidity risk
• Correct Answer: Liquidity risk
• Explanation: The inquiry zeroed in on liquidity risk, among other factors threatening the entity’s viability.

5. In which year was the Sharman Inquiry report published?

• Choices: 2009, 2010, 2012, 2014
• Correct Answer: 2012
• Explanation: The insightful report hit the financial fan in 2012.

6. The Sharman Inquiry suggested auditors should go beyond what specific concept in their assessments?

• Choices: Cash flow analysis, Liquidity analysis, Market analysis, Going-concern concept
• Correct Answer: Going-concern concept
• Explanation: Lord Sharman boldly suggested auditors delve deeper than just ticking the going-concern box.

7. What influential code incorporated the Sharman Inquiry’s recommendations?

• Choices: International GAAP, Sarbanes-Oxley Act, Corporate Governance Task, Corporate Governance Code
• Correct Answer: Corporate Governance Code
• Explanation: Kudos to the Corporate Governance Code for embracing the Sharman insights and strengthening auditor assessments!

8. The Sharman Inquiry was initiated due to inadequacies noticed in which crisis?

• Choices: Dot-com bubble, 2007-08 financial crisis, Oil crisis, Housing bubble
• Correct Answer: 2007-08 financial crisis
• Explanation: The 2007-08 financial debacle ringed alarm bells, triggering the establishment of the inquiry.