A genuine going-concern doubt fails to make it into the auditor's report most often because management's mitigation plan — a promised fundraise, an asset sale, a promoter's informal assurance of support — gets accepted at face value instead of being independently evaluated for feasibility, and SA 570 specifically requires the auditor to assess whether that plan can actually be executed within the relevant period, not merely whether one exists and sounds plausible when described.
Where the evaluation gets skipped
- A promoter's letter of financial support is accepted without checking whether the promoter actually has the financial capacity to honour it.
- A planned asset sale or fundraise is treated as mitigating, without evidence of actual progress — signed term sheets, board approvals, buyer interest — beyond management's stated intention.
- Recurring losses and negative working capital are assessed in isolation each year without aggregating the pattern across multiple years to see the cumulative trend.
- A breach of loan covenants is noted but not followed through to whether the lender has actually waived it or could call the loan, which would materially change the near-term cash position.
- The going-concern assessment is performed as a late-stage checklist item near report signing, rather than integrated into risk assessment from the start of the audit, by which point there's institutional pressure not to disturb an otherwise-finished opinion.
A management representation stating the company is a going concern carries no evidential weight on its own — it has to be corroborated by the auditor's independent evaluation of cash flow forecasts, covenant compliance, and the actual, demonstrable progress of any mitigating plan, not accepted as confirmation.
What actually surfaces the doubt
Testing the mitigation plan against the same evidentiary standard applied to any other audit assertion — does the evidence actually support the claim, independent of who's making it — is what keeps a real going-concern issue from being accepted on the strength of a confident conversation with management.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Audit workflow & automationSA 570: going concern, and when it actually changes the audit reportMost going-concern evaluations end exactly where they should: no material uncertainty, no change to the report. The standard is about the minority of cases where that's not true.
- Audit workflow & automationSA 706: emphasis of matter and other matter paragraphs, and when each appliesBoth paragraphs sit inside an unmodified opinion. The difference is what they're pointing at — something already in the financial statements, or something outside them.
- CARO & Companies ActCARO clause 3(xix): material uncertainty on meeting liabilities, and how it differs from going concernThis clause looks only one year ahead, using financial ratios and ageing as its stated basis. SA 570's going-concern window is longer, and its basis is broader.
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