This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members understand the International Standards on Auditing (UK) (ISAs (UK)) requirements in relation to going concern and the impact the various different situations have on the auditor’s report.

Members may also wish to refer to the following related helpsheets and guidance:

• Audit reports - overview
• Audit reports – modified opinions, emphasis of matter and other matter paragraphs
• Auditing micro-entities
• FRC's Compendium of illustrative auditor’s reports (for periods commencing before 15 December 2019)
• FRC’s Illustrative Auditor’s Reports (for periods commencing on or after 15 December 2019)
• Audit and Assurance Faculty guides

ISA (UK) 570 Going Concern makes it clear that, in the UK, those charged with governance are responsible for the preparation of the financial statements and the assessment of the entity’s ability to continue as a going concern.

The auditor is responsible for obtaining sufficient appropriate audit evidence regarding, and concluding on, the appropriateness of management’s use of the going concern basis of accounting and whether a material uncertainty exists about the entity’s ability to continue as a going concern. The auditor must evaluate management’s assessment of the entity’s ability to continue as a going concern.

ISA (UK) 570 explains that a material uncertainty related to going concern exists when the magnitude of the potential impact of the events or conditions and the likelihood of occurrence is such that appropriate disclosure is necessary for the fair presentation of the financial statements or for the financial statements not to be misleading.

The implications for the audit report depend not only on the audit evidence obtained, but also on the disclosures made by management in the accounts. The various circumstances that can arise (assuming the auditor obtains sufficient evidence to conclude on whether the use of the going concern basis of accounting is appropriate), together with the impact on the audit report, are set out in the following flow chart.

For guidance on drafting an audit report requiring a “material uncertainty related to going concern” section, see Audit and Assurance Faculty guide Going concern – material uncertainty related to going concern. Where the accounts are prepared on a basis other than going concern and this has been appropriately disclosed, the change required to the audit report are explained in Audit and Assurance Faculty guide Going concern – basis other than going concern.

For audits conducted in accordance with ISA (UK) 570 (Revised September 2019), which is effective for periods commencing on or after 15 December 2019, the wording of the ‘conclusions relating to going concern’ or ‘material uncertainty related to going concern’ section (if appropriate) has changed. The FRC’s Illustrative Auditor’s Reports (for periods commencing on or after 15 December 2019) include a range of examples.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.