Meaning
Retrospective audits of past cash movements and financial statements determine the exact point a company became unable to pay its bills. A liquidity look-back provides evidence for legal proceedings or internal reviews regarding financial health. It stops at the start of the period being investigated and ends when the analysis of all relevant bank records is complete.
Forensic Analysis
Accountants examine every transaction during a specific timeframe to find the moment of insolvency. A liquidity look-back uncovers whether a dividend was paid when the company did not have the cash to support it. This review helps identify if management was trading while insolvent.
Data is pulled from ledgers, bank statements, tax filings and expense reports.
Evidence Gathering
Results are used to support or defend against claims of financial misconduct.
Review Boundary
Reviews focus only on the requested dates and do not speculate on future performance. Once the report is finished, the liquidity look-back serves as a final record of the past. It does not change the current cash position of the firm.
It only explains how the company arrived at its current state. No further data is added to the historical file after the audit concludes.
