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Summary of SA 570 – Going Concern

Summary of SA 570            

Going Concern


Going concernAn accounting assumption on which the financial statements of an entity are prepared that the business will go forever & forever. It will never end.
Primary responsibility to assess Going ConcernManagement
Factors on which going concern is assessedv  Degree of future uncertainties;

v  Size & complexity of an entity;

v  Nature & condition of the business

Auditor’s responsibilityTo obtain audit evidences whether the assessment made by an entity regarding its going concern is appropriate;

To identify any material uncertainty about the entity’s ability to continue as going concern.

Indicators of Going Concerns Problemv  Operating;

v  Financial;

v  Others

Auditor’s Duty
To identify whether there is an identification of any event that, may cast significant doubt on the entity’s ability to continue as  a going concernv  By performing risk assessment procedures;

v  Evaluation of management’s assessment regarding the going concern of the entity;

v  Obtaining audit evidence by remaining alert throughout the audit.

Evaluation of Management’ AssessmentFactors to be Consideredv Assessment should includes all those factors that the auditor is aware during the audit;

v Assessment Must cover at least 12 months of period from the date of financial statements;

v  Same period shall covered by the auditor as covered by the management while evaluating such assessment.

Audit Procedures When Events or Conditions Are Identified
Auditor’s DutyTo Perform Additional Proceduresv  Identify existence of material uncertainties;

v  Ask management to make assessment; in case of non assessment by management

v  Evaluate management’s future plans to mitigate the going concern problem.






where the auditor concludes that the material uncertainty existsAuditor’s DutyAuditor’s Report
Case :-1 But the use going concern assumption is appropriateTo determine whether the financial statements :-

v  Adequately describe the principal events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern ;

v  Disclose clearly that there is a material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a

going concern and,

v  therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business


In case where adequate disclosure is made in the financial statements,Unmodified/ Clear Opinion &Emphasis of matter paragraph in the Auditor’s Report
In case where adequate disclosure is not made in the financial statements,Qualified/ Adverse opinion
Case 2 :- But the use of going concern assumption is not appropriateAdverse opinion
In both the cases the auditor shall communicate with the TCWG that :-

v  Whether the events or conditions constitute a material uncertainty;

v   Whether the use of the going concern assumption is appropriate in the preparation and presentation of the financial statements; and

v  The adequacy of related disclosures in the financial statements.



Abhishek Sharma

Abhishek Sharma

Is a Practicing CA from Delhi .
Abhishek Sharma

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