Going Concern
Checklist

The Netherlands adopts ISA 570 as NV COS 570, issued by the NBA. NV COS 570.A1 recognises that going concern matters may constitute key audit matters (kernpunten van de controle) under NV COS 701, and that a material uncertainty related to going concern is by its nature always a key audit matter. This treatment is consistent with the IAASB base standard.

The AFM has identified going concern as a persistent inspection focus area. In thematic reviews, the AFM has found deficiencies in auditors’ evaluation of management’s going concern assessment, particularly: insufficient challenge of management assumptions in cash flow forecasts, failure to obtain adequate audit evidence for mitigating factors cited by management, and inadequate assessment of events or conditions beyond the 12-month look-forward period where information was reasonably available.

NV COS 570.A2 addresses public sector entities, noting that going concern risks may arise when government support is reduced or withdrawn, or in cases of privatisation. Dutch auditors should note that the Wet toezicht accountantsorganisaties (Wta) imposes additional reporting obligations where going concern uncertainties exist for PIE engagements.

The UK applies ISA (UK) 570 (Revised September 2019), which contains significant additions beyond the IAASB base standard. ISA (UK) 570.A2-1 and A2-2 provide UK-specific definitions of material uncertainty, including guidance that the assessment involves both the likelihood of events occurring and their potential impact. This guidance is not found in the base ISA.

ISA (UK) 570.A3 provides an extensive list of financial, operating, and other indicators that may cast doubt on going concern, including: net liability or net current liability position, negative operating cash flows, adverse key financial ratios, inability to pay creditors on due dates, and non-compliance with capital or statutory requirements. ISA (UK) 570.A3-1 requires auditors to identify these events or conditions before considering mitigating factors.

The FRC’s Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks (April 2016) supplements the ISA (UK) requirements. For entities applying the UK Corporate Governance Code, additional guidance applies via the FRC’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting (September 2014). ISA (UK) 570.A3-9 explicitly directs auditors to consider guidance issued by regulatory, enforcement, or supervisory authorities in respect of going concern matters.

Australia adopts ISA 570 as ASA 570, issued by the AUASB. ASA 570.A1 extends the IAASB base text by requiring that both material uncertainty and significant management judgements about the absence of material uncertainty are key audit matters when ASA 701 applies. This is a broader requirement than the base ISA, which only treats the existence of material uncertainty as a key audit matter by its nature.

ASA 570.A2 contains an Australia-specific requirement for audits of listed entities: when the auditor concludes no material uncertainty exists but significant management judgements were involved, the auditor must disclose under a “Going Concern” heading in the auditor’s report how they evaluated management’s assessment. This reporting requirement goes beyond the base ISA 570 and is unique to the Australian adoption.

ASIC audit inspection findings have highlighted going concern as an area requiring improvement. ASIC expects auditors to critically evaluate management’s cash flow forecasts, test the underlying assumptions against available evidence, and consider whether the forecast period adequately covers the assessment period required by the applicable financial reporting framework (at least 12 months from the date the financial report is authorised for issue).

The UAE applies ISA 570 as issued by the IAASB without modification, per Ministerial Resolution No. 403/2015. All requirements for evaluating management’s going concern assessment, identifying events or conditions that may cast significant doubt, and determining the impact on the auditor’s report apply as published in the IAASB Handbook.

Under Federal Decree Law No. 41/2023, auditors in the UAE have reporting obligations to regulatory authorities where going concern risks are identified. The EAAA coordinates with the Ministry of Economy and Tourism, the Central Bank, DFSA, and SCA for quality assurance reviews. Auditors should note that entities in financial free zones may be subject to additional corporate governance requirements that affect the going concern assessment period and disclosure obligations.

US going concern requirements follow a dual-standard framework. AICPA AU-C 570 governs non-public entity audits and aligns closely with ISA 570 (Revised). PCAOB AS 2415, Consideration of an Entity’s Ability to Continue as a Going Concern, applies to audits of SEC registrants and uses a different conceptual framework centred on “substantial doubt” rather than ISA 570’s “material uncertainty.”

Under AS 2415.02, the auditor must evaluate whether there is “substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time, not to exceed one year beyond the date of the financial statements being audited.” This assessment follows a three-step process (AS 2415.03): (1) consider whether audit procedures have identified conditions or events that, in the aggregate, indicate substantial doubt; (2) if so, obtain and evaluate management’s plans to mitigate; and (3) conclude whether substantial doubt remains after considering those plans. When substantial doubt remains, the auditor adds an explanatory paragraph immediately following the opinion paragraph (AS 2415.12–13).

AS 2415.06 provides specific categories of conditions and events that may indicate going concern risk: negative trends (recurring operating losses, working capital deficiencies, negative operating cash flows), indications of financial difficulties (loan defaults, denial of trade credit, debt restructuring), internal matters (work stoppages, dependence on a single project, uneconomic long-term commitments), and external matters (litigation, loss of key franchises or customers, uninsured catastrophes). The PCAOB expects auditors to search proactively for contrary information—evidence that contradicts management’s assertion that the entity can continue as a going concern.

On the accounting side, ASU 2014-15 (codified in ASC 205-40) requires management to evaluate going concern and disclose substantial doubt in the notes to the financial statements, even before the auditor performs their assessment. This shifted going concern responsibility partly to management and created disclosure requirements that did not previously exist in US GAAP. The auditor must evaluate both management’s assessment and the adequacy of the ASC 205-40 disclosures.

PCAOB inspection findings have frequently cited deficiencies in going concern procedures. Common findings include: failure to evaluate all relevant conditions and events in the aggregate (AS 2415.03), insufficient testing of management’s plans and underlying assumptions (AS 2415.07–09), and inadequate documentation of the auditor’s conclusions (AS 2415.17). The PCAOB also requires communication of going concern conclusions to the audit committee (AS 1301.17).

AU-C 570 mirrors ISA 570 (Revised) and uses the same “substantial doubt” terminology established by ASU 2014-15. AU-C 570 requires the auditor to evaluate management’s assessment covering at least 12 months from the date the financial statements are issued (or available to be issued), to perform additional procedures when conditions or events are identified, and to conclude on the adequacy of disclosure. Unlike the PCAOB framework, AU-C 570 explicitly incorporates the concept of a “going concern basis of accounting” and requires evaluation of whether the financial statements should be prepared on an alternative basis when substantial doubt exists and is not alleviated.