What Is ISA 570? Going Concern Audits and 2024 Revisions

ISA 570 is the International Standard on Auditing that sets out how external auditors evaluate whether a company can continue operating for at least the next twelve months and how they report their conclusion. Issued by the International Auditing and Assurance Standards Board (IAASB), it tells auditors what evidence to gather, how to challenge management’s projections, and what language belongs in the audit report when survival is in doubt. A revised version, ISA 570 (Revised 2024), takes effect for audits of financial statements covering periods beginning on or after December 15, 2026, and expands the auditor’s responsibilities around risk assessment, transparency, and communication with boards.¹

Why Going Concern Matters

Every set of financial statements rests on an assumption that the company preparing them will still be operating long enough for the numbers to mean what they say. Under that assumption, assets are valued based on their continued use rather than what they would fetch in a fire sale. Property sits on the books at historical cost, inventory at cost or net realizable value, and long-term contracts stay at their expected value over time.

When management either intends to shut down or has no realistic alternative, the entire measurement framework shifts. Assets drop to liquidation value, long-term liabilities become immediately payable, and restructuring costs that were previously deferred land on the statements at once. The gap between a going concern balance sheet and a liquidation balance sheet for the same company can be dramatic, which is why auditors take the assessment so seriously.

The Twelve-Month Assessment Window

Under ISA 570, the “foreseeable future” means a minimum of twelve months from the date the financial statements are approved. Some accounting frameworks require management to look further out, but twelve months is the floor.²

That floor does not let the auditor stop looking after twelve months. There is no requirement to design specific procedures for events past the mark, but the auditor must ask management whether it knows of any conditions further out that could create doubt. A pharmaceutical company whose sole blockbuster drug loses patent protection in fourteen months sits outside the minimum assessment window, but the auditor cannot ignore it. The further out an event is, the more significant it needs to be before the auditor acts, though the obligation to ask exists regardless.²

Warning Signs That Trigger Deeper Work

The standard lists warning signs that, alone or in combination, may raise significant doubt about whether a business can keep operating. They fall into three groups.

Financial indicators include a net liability position, borrowings approaching maturity without realistic prospects of renewal, negative operating cash flows, deteriorating financial ratios, missed payments to creditors, loan covenant breaches, substantial operating losses, and an inability to fund essential investment. Operating indicators include the loss of key management without replacement, the loss of a major market, customer, supplier, franchise or license, labor difficulties, a disruptive new competitor, and management’s own intent to liquidate. Other indicators include regulatory noncompliance, pending litigation, adverse changes in law, and uninsured catastrophes.²

The standard deliberately avoids naming specific thresholds. There is no magic current ratio that automatically triggers a going concern problem. A tech startup burning cash with strong financing commitments looks very different from a mature retailer with the same ratio. And the list is not exhaustive; auditors are expected to stay alert for anything that signals trouble, even if it does not fit neatly into a category.²

What the Auditor Actually Does

Management bears primary responsibility for assessing whether the going concern basis is appropriate. The auditor’s job is to evaluate that assessment, not to replace it. That evaluation covers the method management used, the assumptions baked into their projections, and the data underlying both.

If management has not performed a formal going concern assessment, the auditor must request one. If the assessment covers less than twelve months from the date the statements are approved, the auditor must ask management to extend it to that floor. When management refuses, the auditor raises the matter with the board or audit committee. Continued refusal itself becomes a problem for the audit and can lead to a modified opinion.³

Cash Flow Projections and Stress Testing

Cash flow forecasts sit at the center of most going concern evaluations. The auditor reviews management’s projections for the assessment period and scrutinizes the assumptions driving them. Under ISA 570 (Revised 2024), auditors are expected to consider whether management performed sensitivity analysis, including pessimistic and optimistic scenarios, to test how changes in key variables affect the outcome. If revenue drops 20 percent instead of growing 5 percent, does the company survive? What if a planned asset sale falls through?³

The revised standard flags management bias as a specific concern. Projections that assume aggressive revenue growth with no historical basis, or that ignore deteriorating trends visible in the company’s own data, are red flags the auditor must challenge.

Debt Covenants and Third-Party Support

Loan agreement terms get close attention. A covenant violation can cascade quickly: the original breach may trigger acceleration clauses making the entire loan balance immediately payable, and that acceleration can trigger cross-default provisions in other agreements. One missed coverage ratio can turn into a liquidity crisis across multiple credit facilities.

The auditor reviews existing debt terms, looks for restructuring agreements or committed credit lines, and evaluates whether management’s borrowing plans are realistic given restrictions on additional debt. Verifying third-party financial support, such as a parent company guarantee, requires reviewing signed agreements or legally binding commitments rather than taking management’s word for it.⁴

Other Mitigation Plans

Beyond financing, auditors evaluate the feasibility of planned asset sales, cost-cutting programs, and strategic pivots. They review legal correspondence tied to pending litigation that could drain resources and examine whether insurance coverage is adequate for known risks. Each element of management’s recovery plan is tested against available evidence, with the auditor asking whether the plan as a whole is achievable rather than merely hopeful.

How the Conclusion Appears in the Audit Report

The auditor’s final view drives the language in the audit report, and the distinctions carry real consequences.

No Material Uncertainty

When the going concern basis is appropriate and no material uncertainty has been identified, the auditor issues an unmodified opinion with no special going concern paragraph. Even so, if events raised initial concern before the auditor concluded no material uncertainty existed, the auditor still checks whether the financial statement disclosures adequately describe those events and management’s response.⁵

Material Uncertainty, Adequately Disclosed

When a material uncertainty exists and management has disclosed it properly, the auditor issues an unmodified opinion but adds a dedicated section titled “Material Uncertainty Related to Going Concern.” That section directs readers to the relevant notes, describes the conditions creating doubt, and states explicitly that the opinion is not modified because of the uncertainty. Under the revised standard, the auditor must also describe how they evaluated management’s assessment within this section, a transparency requirement that did not exist in earlier versions.³

Material Uncertainty, Inadequately Disclosed

When a material uncertainty exists but management’s disclosures are incomplete or missing, the auditor issues a qualified or adverse opinion. A qualified opinion signals that the statements are fairly presented except for the missing disclosure. An adverse opinion states they do not present a fair view. The choice depends on how pervasive the omission is.²

Going Concern Basis Is Inappropriate

When the company is clearly heading for liquidation and the going concern basis has no business being used, the auditor issues an adverse opinion regardless of what the statements disclose. The measurement framework itself is wrong at that point, and no amount of note disclosure fixes it.²

Management Refuses to Assess

When management is unwilling to make or extend its going concern assessment and the matter cannot be resolved with the board, the auditor treats this as a scope limitation. If the potential effects are pervasive, the auditor may disclaim an opinion entirely, meaning they decline to express any view on the financial statements. A disclaimer is the most severe form of modified report.³

Why a Going Concern Opinion Hurts the Company

A going concern paragraph is not just a disclosure formality. It can trigger a chain of financial consequences that accelerates the very problems it describes.

Many loan agreements contain covenants that specifically prohibit the borrower from receiving an audit report with a going concern modification. When the auditor’s report includes one, the borrower immediately violates that covenant, giving the lender the right to demand accelerated repayment, stop future draws on credit lines, or renegotiate interest rates and terms. Lenders draft these clauses precisely because a going concern opinion signals elevated risk.

The damage can spread. Cross-default provisions in other debt agreements may be triggered by the initial breach, turning one lender’s concern into a multi-creditor problem. From an accounting perspective, debt that was long-term may need to be reclassified as current once it becomes callable, which worsens the same balance sheet ratios that created the problem. This feedback loop is one reason going concern assessments generate so much tension between auditors and management.

What Changes Under ISA 570 (Revised 2024)

The revised standard, effective for audits of periods beginning on or after December 15, 2026, is the most significant overhaul of going concern audit requirements in years. It was developed in response to corporate failures that raised questions about whether auditors were doing enough.⁶

Risk assessment expands. Auditors must understand the company’s business model, competitive environment, financing structure, and internal risk processes before forming any view about going concern. They must identify threatening events or conditions before considering any mitigating plans management might have, so the risks get an unvarnished look before management’s responses are weighed against them.³

The revised standard also introduces an explicit anti-bias requirement: auditors must design procedures in a way that is not biased toward finding corroborative evidence or excluding contradictory evidence. That addresses a real tendency in practice where auditors unconsciously look for reasons to confirm management’s optimistic view.

Transparency gets an upgrade. Auditors will be required to describe in the audit report how they evaluated management’s going concern assessment. Communication requirements with audit committees and boards are strengthened, so governance bodies hear directly from the auditor about going concern risks rather than relying only on management’s interpretation. When events or conditions that may cast significant doubt have been identified, or when management is unwilling to make or extend its assessment, the auditor must raise it with those charged with governance.³

For companies with December year-ends, the first audits under the revised standard will cover the period beginning December 15, 2026, so the practical impact will land in the 2027 and 2028 audit cycles. Audit firms are already updating their methodologies and training programs for the transition.