Audit Outcomes
Cash Flow and Solvency Red Flags
Liquidity and solvency early-warning ratios derived from audited statements to flag financial distress.
Why liquidity ratios matter
Audit opinions tell you whether the numbers are fairly stated, but they do not directly tell you whether an entity can pay its bills next month. Liquidity and solvency ratios derived from the audited statements fill that gap, giving oversight bodies an early-warning system for financial distress well before a going-concern paragraph appears. AuditPro Core computes these ratios consistently across entities so distress is flagged on evidence rather than anecdote.
The Numbers
AuditPro Core renders this view from your tenant's live, tamper-evident records. The figures below are illustrative sample data.
Distressed entities
73
▲ 8
Current ratio under 1
112
Negative cash
41
year-end overdrawn
Improving liquidity
29
Entities with current ratio below 1
Distress indicators
| Entity | Current ratio | Cash cover (days) | Trend |
|---|---|---|---|
| Maluti-a-Phofung | 0.3 | 4 | ▼ Worsening |
| Enoch Mgijima | 0.4 | 6 | ▼ Worsening |
| Provincial trading entity | 0.5 | 9 | ▲ Improving |
Figures shown are illustrative sample data for demonstration. AuditPro Core renders these views from your own tenant's live, tamper-evident records.
Liquidity versus solvency
Liquidity measures the ability to meet short-term obligations as they fall due; solvency measures whether total assets exceed total liabilities over the long term. An entity can be solvent yet illiquid, and still fail.
Key early-warning ratios
The current ratio, cash coverage of creditors and the debt-to-revenue ratio are the most telling. Sustained deterioration across them is a reliable predictor of distress.
Why audited data is the right base
Ratios built on audited figures are credible and comparable, unlike in-year management accounts that may later be restated. They give oversight a defensible basis for intervention.
From ratio to intervention
Distress ratios should trigger Treasury support, financial recovery plans or section-139 interventions. The ratio is the trigger; the recovery plan is the response.
How AuditPro Core Bridges the Gap
- Ratio computation: liquidity and solvency ratios are calculated from audited statements on a consistent basis across entities.
- Exception workflow: entities breaching distress thresholds are flagged for recovery-plan attention.
- Continuous monitoring: ratios are tracked across cycles so trend deterioration is visible, not just point-in-time values.
- Audit-ready export: the distress dashboard exports for Treasury and oversight intervention decisions.
Key Takeaways
- An entity can be solvent on paper yet fail through illiquidity.
- Current ratio, cash coverage and debt-to-revenue are the core warning signals.
- Audited figures give intervention a defensible, comparable basis.
- Ratios are triggers; recovery plans are the required response.
See This on Your Own Data
AuditPro Core renders this dashboard from your tenant's live, tamper-evident records — every figure traceable to source.