Why the question of structures is not just a formal obligation

Anyone governing a company or a collective business faces a practical question: can the administrative and accounting organisation bring signs of difficulty to light in good time and support decisions? This is an issue that intertwines company law, accounting standards and day-to-day management. Two references help frame it: Art. 2086 of the Civil Code, as amended by Legislative Decree No. 14 of 12 January 2019, and accounting standard OIC 11, on the purpose and postulates of the annual financial statements.

The first introduces into the Civil Code a duty to establish an organisational, administrative and accounting structure appropriate to the nature and size of the business, including for the purpose of promptly detecting crisis and loss of going concern, with an obligation to act without delay to adopt the tools provided for by the legal system. The second recalls the going concern perspective as a criterion for preparing financial statements, unless it proves non-existent or no longer sustainable. They are different levels, but they speak the same language: the need to turn figures into useful information for decisions.

This article does not address individual engagements or provide ready-made solutions. Instead, it attempts to clarify why governance structures, going concern and financial statements must be read together, what the limits of each tool are, and what checks remain the responsibility of those who govern or advise the company.

Article 2086 of the Italian Civil Code and the duty to have an adequate structure

Article 375 of Legislative Decree 14/2019 amended the heading of Article 2086 of the Italian Civil Code and added a second paragraph. The wording is broad: an entrepreneur operating as a company or collective entity must establish an organisational, administrative and accounting structure appropriate to the nature and size of the business. Adequacy is not an abstract concept: it must be proportionate to the complexity, risks, volumes and characteristics of the activity.

The text links the structure to the "timely detection of business crisis and loss of going concern". It is therefore not merely a set of accounting procedures, but an information system capable of producing relevant signals before the situation deteriorates. The second sentence adds a further duty: to act without delay to adopt and implement one of the instruments provided by the legal system to overcome the crisis and restore going concern.

On this point it is advisable to avoid two common oversimplifications. The first is to regard the structure as a purely documentary requirement, destined to remain in a drawer. The second is to turn it into a uniform checklist valid for every company. The law refers to adequacy in relation to the nature and size of the business, thus requiring a case-by-case assessment. A complex group and a small family-run company do not have the same information needs, even though both must be able to detect any imbalances in good time.

A hypothetical example may help. Imagine a manufacturing company with stable revenues but heavy cash absorption for inventories and receivables. An adequate structure might include periodic reclassification of the financial statements, monitoring of payment schedules and interim reporting focused on cash and margins. This may not be enough to prevent every difficulty: the system signals, it does not decide. The decision remains with the directors, who must interpret the data and, if necessary, adopt the instruments provided.

On another front, the law does not in itself establish a general obligation to appoint an auditor or supervisory bodies. The structure is an organisational duty of the entrepreneur; any bodies required by law or the articles of association perform different functions. Keeping the two levels separate avoids attributing to statutory audit tasks that are not its responsibility.

OIC 11, going concern and quality of disclosure

Accounting standard OIC 11, in the version published by the OIC Foundation, applies to financial statements for financial years beginning on or after 1 January 2018; the paragraphs concerning the going concern perspective apply from 1 January 2017. The document sets out the purpose and postulates of the financial statements and refers to going concern as a preparation assumption, unless it does not exist or is no longer sustainable.

The link with Article 2086 of the Italian Civil Code is logical. If the administrative and accounting system does not produce timely information, the assessment of going concern risks being late or based on perceptions. The financial statements, for their part, are a periodic representation: they arrive at the final balance, with timing that may not be sufficient to intercept an ongoing deterioration. This is why the structure is relevant even when the financial statements are correctly prepared.

Going concern is not a formula to be inserted in the notes to the financial statements. It is an assessment that requires consideration of scenarios, financial resources, business performance and the ability to meet obligations when due. OIC 11, as a standard, provides the framework; it does not automatically provide the answer for the specific case. A company may report a loss for a year and still maintain going concern prospects; another may report a profit but show significant liquidity tensions. These are situations that must be read with appropriate tools.

A hypothetical example: a service company with positive margins but with a client representing a significant share of revenues. If the main contract is nearing expiry and there are no renewals, the financial statements may be formally correct but the forward-looking assessment changes. An information structure attentive to contracts, client concentration and cash can bring the issue to light before the year-end.

From compliance to management: financial statement analysis, scenarios and useful data

An adequate structure is not only for complying with a rule. It is for producing data that can be used for financial statement analysis, scenario building and forward-looking assessments. Here the boundary between obligation and management becomes more blurred, but it does not disappear.

A first concrete step concerns the reclassification of the financial statements: understanding how the margin is formed, how much weight working capital carries, how net financial position moves. Without this basis, any scenario risks being an arithmetic exercise disconnected from reality. A second step concerns the frequency of information: annual financial statements alone do not allow timely management. Interim reports, even concise ones, help maintain control.

The third step is scenario building. It is not about predicting the future, but about exploring alternative hypotheses and assessing their consequences on cash, equity and sustainability. Here too, usefulness depends on the quality of assumptions and transparency about limits. A scenario is not a guarantee; it is a tool for reasoning.

Documents such as financial statement analysis, business plans and preparatory materials for due diligence fall into this area. They are different tools in terms of purpose and recipients. Financial statement analysis looks at the past and the economic and financial structure; the business plan projects scenarios and needs; due diligence collects and organises information for an assessment. None of them replaces the directors' responsibility for management.

A hypothetical example: a company assesses an investment in a new plant. Financial statement analysis shows a solid equity structure; the business plan highlights a cash requirement concentrated in the first two years. If the information structure does not keep liquidity under control, the risk is that the investment proceeds without periodic verification of its sustainability. The data does not decide, but it guides the discussion.

Statutory audit and specialist engagements: what the auditor can and cannot do

The topic of structures and going concern also touches on the role of those performing statutory audit. It is useful to recall, in general terms, that statutory audit of accounts concerns the opinion on the financial statements and not the evaluation of management choices. The auditor expresses a professional opinion based on auditing standards and evidence; they do not replace the directors in decisions nor guarantee the success of strategies.

In the presence of specialist engagements, the scope may expand, but it must be clearly defined. For example, in the context of cost certification for tax incentives, the auditor certifies that eligible expenses were actually incurred and verifies correspondence with the accounting records. They do not replace the technical evaluation of projects, which remains with the competent parties. Distinguishing the two levels avoids improper expectations and overlapping responsibilities.

This separation is also relevant when discussing structures. An auditor can help make the numbers more readable, flag inconsistencies, verify consistency between documentation and accounting records. However, they cannot assume the duty to establish the structure: that duty belongs to the entrepreneur. Nor can they guarantee that the company will not enter into crisis. They can help bring signals to light earlier, if the engagement and information allow.

It is useful to recall that statutory audit is governed by rules and standards that define responsibilities and limits. This is not the place to go into the detail of individual standards, but it is advisable to avoid the idea that the auditor's involvement "makes the company safe". Security, in an economic sense, does not exist; there are more or less adequate information processes.

Limits, precautions and questions to ask

Some points deserve attention. First: the adequacy of the structure cannot be certified once and for all. Size, markets and organisation change; the judgement of what is adequate also changes. A good information system must be reviewed periodically, not only in times of crisis.

Second: going concern is a forward-looking assessment. It requires assumptions, often uncertain. Presenting it as a certain fact would be misleading. The accounting standard offers criteria, but the conclusion depends on the specific situation and available information.

Third: the separation of roles must be maintained. Structures, audit, certifications, analyses and plans are different tools with different responsibilities. Confusing them can generate excessive expectations or improper delegations.

Fourth: the rules cited have a non-trivial application history. Article 375 of Legislative Decree 14/2019 came into force on 16 March 2019, while the Crisis Code has had a gradual application path, with several extensions. Those drafting documents or providing advice should verify the current framework and any subsequent amendments.

In conclusion, the link between structures, going concern and financial statements is not a theoretical exercise. It is a way to approach management with greater awareness of signals. It does not eliminate risks, but it can reduce the probability of discovering too late problems that were already visible in the numbers.

Sources

General information content. For assessments relating to your company, it is necessary to examine the specific case.