ISA 570 Revised 2024: What Changed for Going Concern

Key Takeaways

ISA 570 (Revised 2024) requires auditors to identify events and conditions on a gross basis before considering management's mitigating plans – a fundamental structural change to the going concern working paper.
The auditor must evaluate management's method, significant assumptions, and data on every audit, regardless of whether doubt exists. A one-paragraph concurrence no longer complies.
The assessment period extends to twelve months from the approval date of the financial statements, not the balance sheet date – adding three to five months for most entities.
Every auditor's report must include a Going concern section with two explicit conclusions: whether the going concern basis is appropriate and whether a material uncertainty exists.

Why the IAASB rewrote ISA 570

Carillion collapsed in 2018 with a clean audit opinion issued months before liquidation. Silicon Valley Bank failed in 2023 after its auditor raised no going concern issues. In both cases, the audit files technically complied with extant ISA 570. The IAASB's response wasn't to patch a few paragraphs. It rewrote the standard from the ground up.

The extant ISA 570 (Revised), effective since December 2016, required auditors to evaluate management's going concern assessment. But inspectors kept finding the same deficiencies: insufficient challenge of management's assumptions, no testing of cash flow forecasts, no assessment of the impact of covenant breaches on financing availability. The FRC's 2022–23 inspection of Tier 2 and Tier 3 firms found going concern findings in 38% of inspected audits, with weaknesses concentrated in the rigour of the underlying work and the challenge of management's evidence.

The IAASB began research in 2020 and published an exposure draft in 2023. The Board approved the final standard in November 2024. It was issued in April 2025 and takes effect for periods beginning on or after 15 December 2026, the same date as ISA 240 (Revised). The two standards are designed as a package: fraud and financial distress are interrelated risks, and the IAASB built alignment between them deliberately.

Gross-basis identification: the structural shift

Under extant ISA 570, most audit files assess going concern events and conditions alongside management's mitigating plans in a single step. The client has a maturing loan in eight months, but management says refinancing is underway, so the team concludes no significant doubt exists. The event and the mitigation blur together.

ISA 570 (Revised 2024) separates them explicitly. The auditor must identify events or conditions that may cast significant doubt on going concern on a gross basis, before considering any mitigating factors in management's plans for future actions. A maturing loan is an event. It gets documented as such, regardless of what management intends to do about it. Only after you've identified all events and conditions on this gross basis do you move to evaluating whether management's plans are feasible and sufficient.

This two-step structure forces a different approach to the working paper. Your going concern template can no longer present events and mitigating factors side by side in a single column. Identification comes first. Mitigation evaluation comes second. The documentation must show that the team considered the gross position before assessing the net position.

The revised standard also requires the auditor to design and perform risk assessment procedures that provide an appropriate basis for the identification of events and conditions. The extant standard relied more heavily on inquiry of management and the auditor's understanding from ISA 315. The revised standard makes this a directed evidence-gathering exercise. You need audit evidence, not just professional judgement based on discussions.

New understanding requirements

ISA 570 (Revised 2024) requires understanding of the entity's business model, objectives, strategies, and related business risks relevant to going concern. It requires understanding of industry conditions (including the competitive environment, technological developments, and external factors affecting financing). It requires understanding of the measures used to assess financial performance, including forecasts, future cash flows, and management budgeting processes. And it requires understanding of how those charged with governance exercise oversight over management's going concern assessment.

Evaluating management's assessment on every audit

Under extant ISA 570, the depth of the auditor's evaluation of management's assessment depended partly on whether events or conditions casting doubt on going concern were identified. When no indicators were present, many files contained a brief paragraph stating that management confirmed the entity is a going concern and the auditor concurred.

ISA 570 (Revised 2024) changes this. The auditor must evaluate management's assessment on every audit, irrespective of whether events or conditions have been identified. The revised standard introduces specific evaluation requirements covering management's method, significant assumptions, and data.

On method, the auditor evaluates whether the approach management selected is appropriate in the context of the applicable financial reporting framework, whether changes from the prior period method are appropriate, and whether calculations (if applicable) are mathematically accurate.

Significant assumptions require evaluation of their appropriateness, consistency with each other and with related assumptions in other business areas, and whether changes from prior periods are appropriate.

The data evaluation covers relevance and reliability, appropriateness in the context of the framework, and whether changes from prior periods are appropriate.

The application material acknowledges that the formality of management's assessment varies between entities. A listed company may have a formal board paper with multiple scenarios and sensitivity analysis. A €30M Dutch B.V. may have a board minute stating that the directors have considered going concern and are satisfied the entity can continue operating. The revised standard doesn't require management to produce a formal model, but the auditor still needs to evaluate whatever method, assumptions, and data management used, even if those were informal.

Smaller entities

For smaller entities, this means the auditor will often need to construct the analysis that management didn't. If management's assessment is a single-paragraph board minute, you evaluate the implicit method (qualitative assessment), the implicit assumptions (that current trading will continue, that existing financing will remain available), and the implicit data (current period results and cash position). You document what you evaluated and how, even when management's own documentation is thin.

The assessment period: balance sheet date to approval date

Extant ISA 570 required management's going concern assessment to cover at least twelve months from the date of the financial statements (the balance sheet date). ISA 570 (Revised 2024) extends this to at least twelve months from the date of approval of the financial statements.

For a December 2027 year-end audit where the financial statements are approved on 15 April 2028, the extant standard required assessment through December 2028. The revised standard requires assessment through at least April 2029 – approximately four additional months.

This affects the timing of your going concern work. Cash flow forecasts and financing arrangements need to cover a longer forward period. If your client's management typically prepares a 12-month forecast from the balance sheet date, that forecast will no longer be sufficient. You'll need to discuss this with management early in the engagement, and the revised standard suggests including the extended assessment period in the engagement letter to set expectations.

If management's assessment covers less than twelve months from the approval date and management is unwilling to extend it when requested, the auditor is required to discuss the matter with management and (if appropriate) those charged with governance. If management remains unwilling, the auditor determines the implications for the audit, which may include reconsidering assessed risks and planned procedures, or in pervasive cases, a disclaimer of opinion.

Evaluating management's plans and third-party support

When events or conditions are identified, the auditor must evaluate management's plans for future actions. The extant standard required evaluation of the feasibility of management's plans. ISA 570 (Revised 2024) adds two incremental requirements: the auditor must also evaluate management's intent and ability to carry out specific courses of action, and whether the outcome of those plans is likely to be sufficient to mitigate the effects of the identified events or conditions.

The distinction between feasibility and intent-and-ability matters. A plan to refinance a maturing loan may be feasible (the market exists, the entity's creditworthiness is sufficient), but management may lack the intent to pursue it if the controlling shareholder prefers to inject equity instead. Evaluating both layers produces a more grounded conclusion.

Third-party and related-party support gets its own requirement for the first time. If management's plans include financial support from third parties, related parties, or the entity's owner-manager, the auditor must evaluate the intent and ability of those parties to provide the support. For the many mid-market entities in the Netherlands where the DGA (directeur-grootaandeelhouder) informally backstops the company, this means documenting the DGA's capacity and willingness to inject funds, not just noting that "the shareholder has historically provided support."

Two new conclusions in the auditor's report

ISA 570 (Revised 2024) requires the auditor's report to include a new "Going Concern" section containing two explicit conclusions. First, whether management's use of the going concern basis of accounting is appropriate. Second, whether the auditor has identified any material uncertainty related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern.

Under the extant standard, the auditor's report included going concern language only when a material uncertainty existed or when the going concern basis was inappropriate. The revised standard requires the going concern section on every audit, even when there are no issues. For the vast majority of audit engagements where the entity is clearly a going concern, the section will contain positive conclusions on both points.

The revised standard also introduces a formal definition of "Material Uncertainty Related to Going Concern" (MURGC), which explains the phrase "may cast significant doubt." This definition didn't exist in the extant standard.

For listed entities (and PIEs, depending on local adoption), the revised standard goes further. Where the auditor concludes there is a material uncertainty, or where events and conditions have been identified but the auditor concludes no material uncertainty exists (the "close call" scenario), the auditor must describe how they evaluated management's assessment. The close call scenario is new. Under the extant standard, close calls were often addressed through KAMs under ISA 701, but there was no specific requirement. The revised standard makes the going concern section the required location for this disclosure and notes that a close call is by nature a KAM but is reported in the going concern section (not the KAM section), with a cross-reference in the KAM section's introductory paragraph.

Communications, documentation, and written representations

ISA 570 (Revised 2024) strengthens requirements for timely two-way communication with those charged with governance throughout the audit. The auditor must communicate about going concern matters at appropriate times, not just at the end when conclusions are formed.

Documentation requirements expand to cover the auditor's significant professional judgements, the evaluation of management's method, significant assumptions, and data, and the basis for conclusions on both the appropriateness of the going concern basis and the existence or absence of material uncertainty.

Written representations now require management to confirm that they have disclosed all events and conditions relevant to going concern, that their plans for future actions are complete and that they believe those plans are feasible, and that the going concern basis of accounting is appropriate. The revised standard is more specific than the extant standard about what these representations must cover.

The revised standard also adds a new provision for the auditor to determine whether to communicate with appropriate authorities outside the entity, where law, regulation, or ethical requirements specify requirements or rights to do so.

Worked example: before and after on a real file

Client scenario: Dijkstra Logistics B.V., a Dutch logistics company with €34M revenue, operating leased warehouse facilities, a €6M revolving credit facility maturing in September 2028, declining margins (EBITDA margin dropped from 8.2% to 5.1% over two years), and a DGA who has previously injected €800K in subordinated loans.

How the file looks under extant ISA 570 (Revised)

The going concern section of the planning memo states: "Management has confirmed the entity is a going concern. No events or conditions have been identified that cast significant doubt. The revolving credit facility matures in September 2028, but management has indicated that refinancing discussions are underway."

Events and mitigation assessed together. Declining margins not identified as a separate event. No evaluation of the method, assumptions, or data underlying management's assessment. No assessment of the DGA's capacity to provide support. At completion, the engagement partner signs off with a single-sentence conclusion.

How the file must look under ISA 570 (Revised 2024)

1. Gross-basis identification of events and conditions

The auditor identifies four events or conditions on a gross basis, before considering management's mitigating plans:

The declining EBITDA margin (from 8.2% to 5.1% over two years) signals potential inability to generate sufficient operating cash flow.
The revolving credit facility maturity in September 2028 falls within the assessment period (financial statements approved April 2028, assessment period extends to at least April 2029).
Two operating lease renewals are due in the assessment period, and the landlord for the largest warehouse (€1.2M annual rent) has indicated it may not renew at current terms.
The entity's cash position at year-end is €1.1M with a €6M facility that is fully drawn.

Each event or condition documented individually. No mitigation considered at this stage. The team documented what audit evidence they obtained for each identification (management accounts, bank correspondence, lease agreements, cash position confirmed to bank statement).

2. Evaluation of management's assessment

Management's assessment is a two-page board memo. Method: qualitative assessment supported by a 12-month cash flow forecast from the balance sheet date. The auditor requests management extend the forecast to cover at least twelve months from the expected approval date (April 2028 to April 2029). Management produces an extended forecast.

Significant assumptions: revenue growth of 4%, stable gross margins, successful refinancing of the RCF at current terms, and continued availability of the largest warehouse at a 10% rent increase. The auditor evaluates that the 4% revenue growth assumption is inconsistent with the two-year declining margin trend and requests management's basis. Management provides a new contract pipeline showing €2.8M of committed new revenue from Q2 2028.

3. Evaluation of management's plans

Management's plans include refinancing the RCF (feasibility supported by a term sheet from ABN AMRO, intent confirmed by board resolution, ability assessed as sufficient given the entity's collateral position), renegotiating the warehouse lease (feasibility uncertain, no written indication from landlord, intent confirmed but ability dependent on landlord), and potential subordinated loan from the DGA if needed.

The auditor evaluates the DGA's intent and ability: the DGA's personal tax returns show net assets of €2.4M and liquid assets of €600K. Previous €800K injection was funded partially by a personal mortgage.

4. Conclusion

No material uncertainty identified, but the auditor's report includes the new going concern section with two positive conclusions. The file documents the reasoning with specific reference to the term sheet, the new contract pipeline, and the DGA's confirmed capacity. Gross-basis events documented separately from the net conclusion. The assessment period covers to April 2029.

Implementation checklist

Restructure your going concern working paper into two distinct sections: gross-basis identification of events and conditions (before mitigation) and evaluation of management's plans (after identification). Do not allow these to merge.
Add mandatory fields for evaluating management's method, significant assumptions, and data on every engagement, including those with no indicators. For smaller entities with informal assessments, document what implicit method, assumptions, and data you evaluated.
Update your timeline planning to reflect the extended assessment period (twelve months from approval date, not balance sheet date). Discuss this with management at the planning stage and include it in the engagement letter.
Build prompts for third-party and related-party support evaluation into your going concern template. For owner-managed entities, this means documenting the DGA's capacity and intent with evidence, not just a note that support has been provided historically.
Update your auditor's report template to include the new going concern section with two explicit conclusions. Prepare variants for: no issues, close call (listed entities), and material uncertainty.
Train engagement teams on the gross-basis identification concept before the first engagement under the revised standard. This is the most significant conceptual change and the area where files are most likely to revert to old habits.

Common mistakes to avoid during transition

Mixing gross and net assessment in a single paragraph. The whole point of the revised standard is to separate identification from mitigation. If your working paper shows "the RCF matures in September 2028 but management has a term sheet for refinancing," you've combined them. Identify the maturity as a gross-basis event first. Evaluate the refinancing plan separately.

Skipping the method, assumptions, and data evaluation when no indicators are present. ISA 570 (Revised 2024) requires this on every audit. The FRC's 2023–24 enforcement report listed failure to properly consider management's going concern assessment as one of its five enforcement themes.

Accepting the DGA's verbal confirmation as sufficient evidence of support capacity. The revised standard requires evaluation of intent and ability. For owner-managed entities (the majority of the non-Big 4 portfolio in the Netherlands), this means obtaining evidence of the third party's financial position, not just a statement of willingness.

Frequently asked questions

What is gross-basis identification under ISA 570 (Revised 2024)?

Gross-basis identification requires the auditor to identify events or conditions that may cast significant doubt on going concern before considering any mitigating factors in management's plans for future actions. Under the extant standard, most files assessed events and mitigation together in a single step. The revised standard separates identification from evaluation, requiring the auditor to document the gross position before assessing the net position.

Does ISA 570 (Revised 2024) require evaluation of management's assessment on every audit?

Yes. The auditor must evaluate management's method, significant assumptions, and data on every audit, regardless of whether events or conditions casting doubt on going concern have been identified. Under the extant standard, the depth of evaluation depended partly on whether indicators were present. The revised standard removes that conditionality.

How does the assessment period change?

The assessment period extends from twelve months from the balance sheet date to twelve months from the date of approval of the financial statements. For a December 2027 year-end with approval in April 2028, the assessment period extends to at least April 2029 rather than December 2028, adding approximately four months.

What are the two new conclusions required in the auditor's report?

Every auditor's report must include a Going concern section with two explicit conclusions: whether management's use of the going concern basis of accounting is appropriate, and whether the auditor has identified any material uncertainty related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern. Under the extant standard, going concern language appeared only when a material uncertainty existed or the going concern basis was inappropriate.

What is the "close call" scenario under ISA 570 (Revised 2024)?

For listed entities (and PIEs, depending on local adoption), where events and conditions have been identified but the auditor concludes no material uncertainty exists, the auditor must describe in the Going concern section how they evaluated management's assessment. This close call disclosure is new. Under the extant standard, close calls were often addressed through KAMs under ISA 701, but there was no specific requirement.