Audit and Assurance · Going concern

ISA 570 Going Concern Audit Procedures Explained

Updated 11 October 2026

Under ISA 570, the auditor must conclude whether management's use of the going concern basis is appropriate and whether a material uncertainty exists. You do this by evaluating management's assessment, testing cash flow forecasts and assumptions, and gathering evidence up to the report date, including post year-end events and lender support.

Understand Audit Procedures for Going Concern (ISA 570)

Financial statements are normally prepared on the going concern basis. This assumes the entity will continue in operation for the foreseeable future. If it will not, assets and liabilities may need to be measured differently, for example at expected realisable amounts.

Management is responsible for assessing going concern and for preparing the financial statements on the right basis. The auditor is not responsible for making the assessment. The auditor's job under ISA 570 is to obtain sufficient appropriate evidence on whether management's use of the going concern basis is appropriate. The auditor must also conclude whether a material uncertainty exists about the entity's ability to continue.

The auditor starts at risk assessment. You consider events or conditions that may cast significant doubt, such as losses, net current liability position, loan defaults, loss of key customers or supply problems. You then ask management how it has assessed going concern. Later, you evaluate that assessment.

The period matters. Under ISA 570 (Revised 2024), the auditor evaluates management's assessment over the period management has used. That period should be at least twelve months from the date of approval of the financial statements, or longer if the applicable framework requires. The earlier version of the standard used twelve months from the balance sheet date. If management's period is shorter, the auditor requests management to extend it. The auditor also inquires whether management is aware of events or conditions beyond the period that may cast significant doubt on going concern.

Management may refuse to make or extend its assessment. The auditor then considers the implications for the report. If sufficient appropriate evidence cannot be obtained, this is a limitation on scope, which may lead to a qualified opinion or a disclaimer of opinion, depending on the circumstances.

Evidence is gathered up to the date of the auditor's report. The strongest evidence is often external: lender confirmation, post year-end sales and cash receipts, and written support from a parent or director. Your conclusion then drives the report: an unmodified opinion with no extra paragraph, an unmodified opinion with a material uncertainty paragraph, a modified opinion, or an adverse opinion if the basis is inappropriate.

Key rules to remember

Auditor's core conclusions: Is the going concern basis appropriate? + Does a material uncertainty exist?; Both questions must be answered from evidence. Every going concern question comes back to these two.
Period of management's assessment: At least 12 months from the date of approval of the financial statements (ISA 570 (Revised 2024)), or longer if the applicable framework requires; The auditor evaluates the assessment over the period management has used. If it is shorter, the auditor requests management to extend it. The auditor also inquires about events or conditions beyond the period. If management refuses, the auditor considers the implications for the report.
Evidence timeline: Procedures continue to the date of the auditor's report; Include events after the year end, for example post year-end sales, cash receipts and lender decisions.
Report outcomes: Basis appropriate, no material uncertainty: unmodified. Basis appropriate, uncertainty adequately disclosed: unmodified with a Material Uncertainty Related to Going Concern section. Disclosure inadequate: qualified or adverse. Basis inappropriate: adverse. Sufficient appropriate evidence cannot be obtained, for example because management refuses to extend its assessment: limitation on scope, which may lead to a qualified opinion or a disclaimer of opinion, depending on the circumstances.; Link your procedures to the likely opinion.

How to solve Audit Procedures for Going Concern (ISA 570) questions

Use this method for any question asking for procedures, evidence or conclusions on going concern.

1Identify the events or conditions in the scenario that raise doubt, such as losses, overdraft, covenant breach or loss of a major customer.
2State who is responsible: management assesses, the auditor evaluates. Note the period management has used.
3List procedures on management's assessment: discuss the plans, check the period covered, and ask for an extension if it is under twelve months.
4Add procedures on cash flow forecasts: check arithmetic, compare to past accuracy, test assumptions against evidence, and run sensitivities.
5Add procedures on financing and support: review loan agreements, covenant compliance, facility letters and written support from related parties, and consider whether that party can actually provide it.
6Add post year-end evidence: sales, cash receipts, order book, board minutes, correspondence with lawyers and lenders, and a written representation from management.
7Conclude on whether a material uncertainty exists and whether disclosure is adequate, then state the effect on the audit report.
8Tie each procedure to the specific facts given so the answer is not generic.

Quickest way: Doubt, forecast, support, conclude

When to use it: Use this when you have a few minutes for a short Section B or Section C part on going concern procedures.

Doubt: name the events from the scenario that cause concern.
Forecast: write 2 or 3 procedures on the cash flow forecast, covering assumptions, accuracy history and sensitivity.
Support: write 2 procedures on finance, covering loan terms, covenants, facility renewal and guarantees.
Post year-end: add one procedure on events after the year end, and one on written representations.
Conclude: state the opinion effect, depending on disclosure.

Common mistakes in Audit Procedures for Going Concern (ISA 570)

Saying the auditor must assess going concern.
The word audit is confused with the whole process of preparing the statements.
Fix: Write that management makes the assessment and the auditor evaluates it and concludes on its appropriateness.
Listing generic audit procedures such as inventory counts.
Students recite a memorised list without checking the scenario.
Fix: Choose procedures that test the forecast, funding and post year-end evidence, and tie each to a stated fact.
Only checking the forecast arithmetic.
Arithmetic is the easiest thing to check.
Fix: Also test whether assumptions are reasonable and supported, compare past forecasts with actual results, and consider sensitivity to adverse changes.
Stopping evidence at the year end.
Students forget the work continues until the report is signed.
Fix: Include post year-end sales, cash receipts, bank statements, lender correspondence and board minutes up to the report date.
Treating management's refusal to extend the assessment period as irrelevant.
Students overlook the period requirement.
Fix: Say the auditor requests an extension, and if management refuses, consider the effect on the report, which may mean modification.
Assuming a parent's support letter is enough on its own.
A written comfort letter looks like strong evidence.
Fix: Assess the parent's ability to provide support and its intentions, and seek corroborating evidence such as its own financial position.

Worked examples

Example 1

Torvan Ltd has a year end of 31 December 20X1. The financial statements are expected to be approved on 30 April 20X2. The company has an overdraft near its limit and made a loss this year. Management's cash flow forecast covers six months from the year end, to 30 June 20X2, and assumes a major customer renews its contract. List the audit procedures the auditor should perform on the assessment.

Show the solution

Period: the forecast ends on 30 June 20X2, only two months after the approval date of 30 April 20X2. ISA 570 (Revised 2024) expects management's period to be at least twelve months from approval, which is to 30 April 20X3. The forecast is too short, so the auditor requests management to extend it to cover at least that period.
Ask management whether it is aware of events or conditions beyond its period that may cast doubt on going concern.
If management refuses, the auditor considers the implications for the report. If sufficient appropriate evidence cannot be obtained, this is a limitation on scope, which may lead to a qualified opinion or a disclaimer of opinion.
Forecast reliability: compare past forecasts with actual results to judge management's accuracy, and check the arithmetic.
Key assumption: obtain the contract renewal evidence, such as signed documents or correspondence with the customer, and test whether it is realistic.
Sensitivity: ask what happens to cash if the customer does not renew, and review the effect on the overdraft.
Funding: review the overdraft facility letter and renewal date, and confirm with the bank if appropriate.
Post year-end: examine cash receipts, sales and bank statements after the year end, and board minutes.
Representation: obtain a written representation from management on its plans.

Answer: The auditor should ask management to extend its assessment to cover at least twelve months from the date of approval of the financial statements (to 30 April 20X3), inquire about events beyond the period, test the forecast and the customer renewal assumption, review the overdraft facility, examine post year-end evidence, and obtain management representations. If management refuses to extend and sufficient appropriate evidence cannot be obtained, this is a limitation on scope that may lead to a qualified opinion or a disclaimer of opinion.

Example 2

An auditor concludes that the going concern basis is appropriate but a material uncertainty exists. The financial statements describe the uncertainty clearly. What is the effect on the audit report?

Show the solution

The basis is appropriate, so the opinion is not adverse for that reason.
A material uncertainty exists and is adequately disclosed, so the opinion is not qualified for a disclosure failure.
The opinion remains unmodified.
The report includes a separate section headed Material Uncertainty Related to Going Concern. It draws attention to the note disclosing the uncertainty and states that the opinion is not modified in respect of the matter.

Answer: The auditor issues an unmodified opinion with a Material Uncertainty Related to Going Concern section referring to the disclosure note.

Exam tips

Always link procedures to the facts in the scenario. Generic lists score poorly in constructed response questions.
In objective test questions, check who is responsible: management assesses, the auditor evaluates. Wrong options often reverse this.
Remember the twelve month point and the auditor's request to extend a shorter period.
Remember that doubt after the year end can still matter: evidence is gathered up to the report date.
Finish a constructed response answer with the effect on the audit report. It earns the final marks.

Audit Procedures for Going Concern (ISA 570): frequently asked questions

What are the main audit procedures for going concern under ISA 570?

Evaluate management's assessment and its period, test the cash flow forecast and its assumptions, review financing arrangements and covenants, and examine post year-end events. Obtain written representations from management. Conclude on appropriateness and material uncertainty.

How do you audit a cash flow forecast for going concern?

Check the arithmetic and compare earlier forecasts with actual results. Test key assumptions against external or documentary evidence. Consider how sensitive the cash position is to adverse changes, and whether the forecast is consistent with other audit evidence.

What if management will not extend its assessment period?

Under ISA 570 (Revised 2024), the auditor evaluates the assessment over the period management has used, which should be at least twelve months from the date of approval of the financial statements, or longer if the framework requires. If it is shorter, the auditor requests management to extend it. If management refuses, the auditor considers the implications for the report. If sufficient appropriate evidence cannot be obtained, this is a limitation on scope, which may lead to a qualified opinion or a disclaimer of opinion.

Is the auditor responsible for predicting whether a company will fail?

No. The auditor cannot guarantee the future. The auditor evaluates management's assessment using evidence available up to the report date and reports on that basis.