Under ISA (UK) 570 the auditor must obtain evidence and conclude on two things: whether the directors were right to use the going concern basis, and whether a material uncertainty about going concern exists. The auditor tests the directors’ own assessment, insists it covers at least twelve months from the date the accounts are approved, and reports a material uncertainty in a separate section of the audit report if one exists and is properly disclosed.

What exactly is the auditor responsible for?

The directors, not the auditor, assess whether the company is a going concern. ISA (UK) 570 (Revised September 2019) notes that in the UK those charged with governance are responsible for preparing the accounts and making that assessment. The directors’ side of the process is covered in going concern: what directors and accountants must assess. This page covers what the auditor does with it.

Paragraph 6-1 sets the auditor’s responsibilities: to obtain sufficient appropriate evidence about, and conclude on, whether a material uncertainty related to going concern exists and whether management’s use of the going concern basis is appropriate. These responsibilities apply even if the accounting framework does not explicitly require a going concern assessment. Paragraph 7 sets the limit: the auditor cannot predict the future, so the absence of any reference to a material uncertainty in the audit report is not a guarantee that the company will continue.

Paragraph 9-2(b) defines a material uncertainty as an uncertainty about events or conditions that may cast significant doubt on the entity’s ability to continue, where the potential impact and likelihood mean disclosure is needed for the accounts to give a fair presentation or not to be misleading.

What does the auditor look at during planning?

Going concern is built into risk assessment. Paragraph 10-2 requires an understanding of the business model and risks, how the company is financed, its forecasting and budgeting, the going concern requirements of the accounting framework, governance over the assessment, and how the company identifies and responds to risks to its survival. If the directors have not yet made an assessment, the auditor must ask them to (paragraph 10-3). The auditor must ask about events beyond the assessment period (paragraph 10-4), consider whether going concern pressure creates a risk of management bias (paragraph 10-5), and stay alert for warning signs throughout the audit (paragraph 11).

Paragraph A3 lists examples of warning signs, including:

  • Net liabilities or net current liabilities.
  • Borrowings approaching maturity without realistic prospects of renewal or repayment.
  • Negative operating cash flows, substantial operating losses or adverse key ratios.
  • Inability to pay creditors on due dates or to comply with loan terms.
  • Loss of a major customer, key supplier or key management without replacement.
  • Pending legal or regulatory proceedings the company may be unable to satisfy.

Paragraph A3 also says these can be mitigated, for example by plans to dispose of assets, reschedule loans or raise capital. If the auditor finds warning signs the directors had not identified or disclosed, paragraph 11-1 requires the auditor to ask the directors to do more work, ask why their assessment missed them, and perform additional procedures.

How does the auditor test the directors’ assessment?

Paragraph 12-2 sets out the core procedures, which mirror the approach used for auditing accounting estimates:

  1. Method. Is the way the directors assessed going concern appropriate, are changes from last year justified, and are the calculations accurate?
  2. Data. Is the underlying data relevant and reliable?
  3. Assumptions. Are the assumptions supported, consistent with each other and consistent with assumptions used elsewhere, such as in impairment reviews?
  4. Plans. Are the directors’ plans to deal with problems likely to improve the position and feasible?
  5. New information. Has anything relevant emerged since the assessment was made?
  6. Representations. Obtain written representations about future plans and their feasibility.

Paragraph 12-3 calls for particular scepticism when reviewing cash flow forecasts. The auditor’s work must cover the same period as the directors’ assessment (paragraph 13-1). If that assessment covers less than twelve months from the date the accounts are approved, paragraph 14-1 requires the auditor to ask the directors to extend it to at least twelve months from that date. This is a common trap: a forecast running to twelve months after the balance sheet date is often too short by the time the accounts are signed.

Do small owner managed companies need formal forecasts?

Not always. Paragraph A11 says that for entities with uncomplicated circumstances, which includes many smaller companies, sufficient evidence may not require formal cash flow forecasts and budgets for the full period, although they are the most persuasive evidence. Paragraph A12 accepts that small company directors may rely on in depth knowledge of the business rather than a detailed model, but the auditor must still evaluate their method and corroborate their contentions with documents.

Owner support is often decisive. Paragraph A8-13 explains that where a small company relies on a director’s loan or personal guarantee, the auditor may obtain documentary evidence of any loan subordination or guarantee, evaluate the owner’s ability to provide the support, and ask for written confirmation of its terms and the owner’s intention. A verbal assurance that the director will keep funding the company is rarely enough on its own.

What if the directors will not extend or support their assessment?

Paragraph 15-1 requires the auditor to discuss the matter with management and, where appropriate, those charged with governance. If sufficient information is still not provided, the auditor considers the effect on the opinion and whether there is a significant deficiency in internal control. Paragraph A18-1 explains that a qualified, adverse or disclaimer of opinion may result, depending on the framework. If approval of the accounts is significantly delayed, paragraph 26 requires the auditor to ask why and, if the delay may relate to going concern, to perform further procedures.

How does the conclusion change the audit report?

Auditor’s conclusion Effect on the report (ISA (UK) 570 Revised September 2019)
Going concern basis appropriate, no material uncertainty Section headed “Conclusions relating to Going Concern” stating no material uncertainty has been identified for at least twelve months from when the accounts are authorised for issue (paragraph 21-1)
Basis appropriate, material uncertainty adequately disclosed Unmodified opinion plus a separate “Material Uncertainty Related to Going Concern” section drawing attention to the note (paragraph 22)
Basis appropriate, material uncertainty not adequately disclosed Qualified or adverse opinion (paragraph 23)
Going concern basis inappropriate Adverse opinion (paragraph 21)
Multiple significant uncertainties In extremely rare cases, a disclaimer of opinion (paragraph A33)

Even where there is no material uncertainty, paragraph 20 requires the auditor to evaluate whether the accounts adequately disclose the events or conditions that were identified. The auditor must also communicate going concern findings to those charged with governance unless they all manage the entity (paragraph 25). For more on modified opinions, see types of audit opinion.

What changes for periods beginning on or after 15 December 2026?

The FRC published ISA (UK) 570 (Revised March 2026) on 30 April 2026, effective for audits of periods beginning on or after 15 December 2026. The FRC said the changes reflect lessons from corporate failures and align with the IAASB, with minimal additional work expected because UK practice was already ahead. In the revised text, where the basis is appropriate and no material uncertainty exists, the report includes a section headed “Going Concern” stating the auditor’s conclusions and that they are based on evidence up to the date of the report and are not a guarantee (paragraph 34). Where the opinion is adverse because the basis is inappropriate, or the auditor disclaims, separate going concern sections are not included unless law requires them (paragraphs 37 and 38). Paragraph 39 expands the written representations, covering the method, significant assumptions and data used in the assessment.

What does this look like in practice?

Illustration only. A company with a 31 March year end has net current liabilities and an overdraft due for renewal in four months. The directors’ forecast runs to the following 31 March, but the accounts will be signed in September, so the auditor asks for the forecast to be extended to at least the following September. The auditor agrees opening cash to the bank, compares last year’s forecast with actual results, checks the bank’s renewal correspondence, and tests a downside scenario where the overdraft is reduced. If renewal is likely but not yet agreed and the downside shows a funding gap, the auditor may conclude a material uncertainty exists. Provided the note explains the overdraft renewal and the directors’ plans, the opinion is unmodified, with a Material Uncertainty Related to Going Concern section.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.