Advanced Audit and Assurance (International) · Completion and final review

Going Concern Review (ISA 570) for ACCA Advanced Audit and Assurance

Updated 11 October 2026

Going concern review is the auditor's evaluation of whether management's use of the going concern basis is appropriate and whether a material uncertainty exists. You assess management's assessment, perform further procedures, then conclude on disclosure and the report: unmodified, material uncertainty section, qualified or adverse, or disclaimer.

Understand Going Concern Review (ISA 570)

Financial statements are normally prepared on the going concern basis. This assumes the entity will continue in operation for the foreseeable future and will not liquidate or stop trading. If the assumption is wrong, assets and liabilities would be measured very differently.

Management must assess the entity's ability to continue. The auditor does not make that assessment for them. Your job is to evaluate management's assessment and decide whether the going concern basis is appropriate. You evaluate the period management used, which ISA 570 (Revised) expects to be at least twelve months from the date of the financial statements. If management's period is shorter, you request management to extend it to at least twelve months. You also enquire about events beyond that period that may cast doubt.

You start in risk assessment. Look for events or conditions that may cast significant doubt. Typical ones: net current liabilities, loan repayments falling due without realistic refinancing, negative operating cash flows, loss of a key customer or licence, adverse key ratios, breach of covenants, and legal claims. If you find any, you extend your work: review management's cash flow and profit forecasts, test their assumptions, check the reliability of the data, and consider post year-end events.

Then you conclude. There are four outcomes. First, the basis is appropriate and there is no material uncertainty: unmodified opinion with no going concern section. Second, the basis is appropriate but a material uncertainty exists and is adequately disclosed: unmodified opinion with a separate section headed Material Uncertainty Related to Going Concern. Third, the basis is appropriate, a material uncertainty exists, but disclosure is inadequate: the missing or inadequate disclosure is a material misstatement. You then choose between a qualified ('except for') opinion if the effect is material but not pervasive, and an adverse opinion if the effect is material and pervasive. Fourth, the basis is inappropriate and the statements are still prepared on it: an adverse opinion.

A separate case is a scope limitation. If management refuses to make or extend its assessment, this is a limitation on your work and you consider the implications for your report. Give a qualified opinion if the possible effects are material but not pervasive. Give a disclaimer of opinion if they are material and pervasive. A disclaimer may also arise where the effects of multiple uncertainties are so significant that you cannot form an opinion.

A material uncertainty exists when the magnitude of the potential impact and the likelihood of its occurrence are such that, in the auditor's judgement, disclosure is necessary for the statements to give a true and fair view or to avoid misleading users. Distinguish this from a key audit matter: where an entity has a material uncertainty, it is reported in its own section, not as a KAM. ISA 701 requires the KAM section to state that matters covered by the Material Uncertainty Related to Going Concern section are not KAMs, and to refer to that section.

Key rules to remember

Going concern basis: Going concern basis appropriate ⇔ no realistic alternative to continuing in operation for the foreseeable future; Management must prepare on another basis if it intends to liquidate or cease trading, or has no realistic alternative.
Assessment period: Period management used is expected to be ≥ 12 months from the date of the financial statements; If management's period is shorter, the auditor requests management to extend it to at least twelve months. The auditor also enquires about events or conditions beyond that period. Do not state a fixed limit beyond it.
Outcome 1: basis appropriate, no material uncertainty: Unmodified opinion; no going concern paragraph; Even with doubts that were resolved by evidence.
Outcome 2: material uncertainty, adequately disclosed: Unmodified opinion + 'Material Uncertainty Related to Going Concern' section; Refers to the note in the financial statements. Do not use an emphasis of matter instead.
Outcome 3: material uncertainty, inadequately disclosed: Qualified ('except for') opinion if material but not pervasive; adverse opinion if material and pervasive; The omitted or inadequate disclosure is a material misstatement. Choose qualified or adverse by whether its effect is pervasive. Include a basis for opinion section stating the uncertainty exists and the statements fail to disclose it adequately.
Outcome 4: basis inappropriate: Adverse opinion; Applies where statements are prepared on the going concern basis but it is inappropriate.

How to solve Going Concern Review (ISA 570) questions

Use this order for any going concern requirement. It links the scenario to procedures and then to the report.

1Read the scenario and list every event or condition that casts doubt: financial, operating and other. Quote the figures.
2Say what management has done: has it assessed, over what period (ISA 570 (Revised) expects at least twelve months from the date of the financial statements; if shorter, request an extension), and with what support? Note any gaps.
3Set out procedures matched to each indicator. Examples: review cash flow forecasts, test assumptions, check loan terms and covenants, get bank confirmation of facilities, read board minutes, review post year-end sales and cash receipts.
4Evaluate the evidence against the scenario. Is there a realistic plan, such as asset sales or new finance, and is it feasible and within management's control?
5Decide whether a material uncertainty exists, considering magnitude and likelihood.
6Assess the disclosure in the financial statements: the events, management's plans and the statement that a material uncertainty exists.
7Conclude on the report: the opinion type and the section needed. Justify it in one or two sentences.
8Add communication points: discuss with those charged with governance, and request written representations about plans.

Quickest way: Indicator, procedure, conclusion

When to use it: Use when time is short and the question asks for procedures, the report effect, or both.

Write two or three indicators from the scenario with figures.
For each, write one specific procedure that tests it, not a generic one.
State whether management's plans are feasible and supported.
Write the report outcome in one line: appropriate with adequate disclosure, inadequate disclosure, or inappropriate basis.
Close with the section heading or opinion type.

Common mistakes in Going Concern Review (ISA 570)

Listing generic procedures such as 'review the financial statements' without tying them to the scenario.
Students memorise a list and write it out.
Fix: Start each procedure with the indicator it tests, for example 'Because the loan of $4m is due in six months, obtain the facility letter and refinancing correspondence'.
Saying the auditor must assess going concern.
The word 'assess' is used loosely.
Fix: Say management makes the assessment and the auditor evaluates it and concludes on the appropriateness of the basis.
Using an emphasis of matter paragraph for a material uncertainty.
Older practice and other emphasis cases cause confusion.
Fix: Use a separate section headed 'Material Uncertainty Related to Going Concern' where disclosure is adequate.
Qualifying the opinion whenever there is doubt.
Students link doubt with modification.
Fix: Modify only if disclosure is inadequate or the basis is inappropriate. Adequate disclosure of a material uncertainty leaves the opinion unmodified.
Accepting management's forecast without testing it.
Students treat the forecast as evidence in itself.
Fix: Test the assumptions, check the arithmetic, compare past forecasts with actual results, and consider the reliability of the source data.
Ignoring professional skills marks.
Students focus only on technical points.
Fix: Show scepticism, link points to the scenario, and write the recommendation in clear, structured language for the reader.

Worked examples

Example 1

Delta Ltd has a year-end of 31 December. It has net current liabilities of $3.2m, a bank loan of $5m due for repayment on 30 April, and lost its largest customer, who contributed 40% of revenue. Management has prepared a cash flow forecast showing it can continue if the bank extends the loan. Explain the audit procedures you would perform on going concern.

Show the solution

Indicators: net current liabilities of $3.2m, loan of $5m due within four months of the year end, and a major customer lost, which damages cash inflows.
Management's position depends on the bank extending the loan. That is outside management's control, so it needs strong evidence.
Obtain and review the loan agreement for repayment terms and covenants, and check for breaches.
Obtain written evidence from the bank on renewal or extension, and discuss status with management. Without it, the doubt remains.
Review the cash flow forecast: check arithmetic, test assumptions such as sales from remaining customers and cost savings, and compare the prior year forecast with actual results.
Perform a sensitivity analysis on the forecast, including removal of the lost customer's revenue.
Review post year-end events: sales orders, cash receipts, and board minutes about alternative finance.
Obtain written representations about management's plans and their feasibility.

Answer: Perform procedures on the loan terms and any extension, test the forecast and its assumptions, review post year-end evidence, and obtain representations. Without firm bank support, a material uncertainty is likely and must be disclosed.

Example 2

Following the procedures on Delta Ltd, the bank has not confirmed an extension. Management has disclosed in a note that a material uncertainty exists, explaining the loan, the lost customer and its plans. Explain the effect on the auditor's report. Then state the effect if management refused to include the note.

Show the solution

The going concern basis is still appropriate, because management has plans and has not intended to liquidate.
A material uncertainty exists, because the loan repayment is not secured and the impact would be large.
The disclosure is adequate: it describes the events, management's plans and the existence of the uncertainty.
Therefore the opinion is unmodified.
Add a separate section headed 'Material Uncertainty Related to Going Concern', referring to the note and stating that the opinion is not modified in respect of the matter.
If management refuses to disclose, the uncertainty exists but disclosure is inadequate. The omitted disclosure is a material misstatement of the financial statements, so the opinion must be modified.
Choose the type of modification by pervasiveness. If the effect of the omission is material but not pervasive, give a qualified ('except for') opinion. If the effect is material and pervasive, give an adverse opinion. This is a judgement on whether the omission affects only specific disclosures or the statements as a whole.
In either case, include a basis for opinion section explaining the failure to disclose, and do not use the material uncertainty section.

Answer: With adequate disclosure: unmodified opinion plus a Material Uncertainty Related to Going Concern section. If the note is refused: the omission is a material misstatement. Give a qualified opinion if the effect is material but not pervasive, or an adverse opinion if it is material and pervasive, with the reason set out in the basis for opinion section.

Exam tips

Match procedures to the figures in the scenario. Quote the numbers, because generic lists earn few marks.
Always conclude on the report. Many students stop at procedures and lose the easy marks.
Separate the questions: is the basis appropriate, does a material uncertainty exist, and is disclosure adequate. The report follows from the answers.
Mention evidence outside management's control, such as bank support, as needing external confirmation.
In reports questions, use the exact section headings and say the opinion is unmodified or modified.

Practice questions from Completion and final review

Going Concern Review (ISA 570): frequently asked questions

What is the difference between material uncertainty and significant doubt?

Events or conditions may cast significant doubt on the entity's ability to continue as a going concern. A material uncertainty exists where the magnitude and likelihood of the potential impact of those events or conditions make disclosure necessary. The two terms are closely linked, but they are not the same thing. In an exam answer, use 'material uncertainty' when discussing the report.

Does a material uncertainty always lead to a modified opinion?

No. If the going concern basis is appropriate and the uncertainty is adequately disclosed, the opinion is unmodified. You add a Material Uncertainty Related to Going Concern section. You modify the opinion only if disclosure is inadequate or the basis is inappropriate.

What period must the auditor consider?

You evaluate the period management used. ISA 570 (Revised) expects it to be at least twelve months from the date of the financial statements. If management's period is shorter, you request management to extend it to at least twelve months. You also enquire of management whether it is aware of events or conditions beyond that period which may affect going concern.

Is a going concern key audit matter the same as a material uncertainty?

No. A material uncertainty is reported in its own section, not as a key audit matter. ISA 701 requires the KAM section to state that matters covered by the Material Uncertainty Related to Going Concern section are not KAMs, and to refer to that section. Going concern work may still feature in the KAM section where the matter needed significant auditor attention but did not lead to a material uncertainty.