Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What role does the administrator play in relation to the company?

1. A financial consultant

2. An external auditor

3. The company's operational manager

4. The company's agent

The correct answer is: The company's agent

The role of the administrator in relation to the company primarily involves acting as the company’s agent, particularly in scenarios where the company is facing financial difficulties or insolvency. An administrator is tasked with managing the company’s affairs, business, and property, often to rescue the company as a going concern or to achieve a better return for creditors than would be possible through liquidation. As an agent, the administrator has the authority to make decisions on behalf of the company, which may include negotiating with creditors, restructuring the business, and making operational changes aimed at improving the company's financial situation. This role is crucial in protecting the interests of creditors while attempting to maintain the viability of the business. The other roles mentioned, such as a financial consultant, an external auditor, or a company’s operational manager, focus on specific functions or responsibilities that do not encompass the comprehensive management and decision-making authority typically associated with an administrator during insolvency proceedings. An administrator’s responsibilities go beyond mere consultancy or oversight; they actively engage with the company's operations to navigate complex financial challenges.