What is a going concern opinion?
Picture the review meeting where a manager says: "there is definitely a material uncertainty here, but management put in a decent note, so we just add the MURGC paragraph and move on." That instinct is correct about half the time. The other half, the disclosure is missing a key element or the going concern basis itself is wrong, and the report needs a qualified or adverse opinion instead of an emphasis paragraph. Confusing these two outcomes is one of the most common reporting errors the FRC flags.
A going concern opinion sits at the end of a decision tree. ISA 570.21 requires the auditor to first determine whether events or conditions exist that cast significant doubt on the entity's ability to continue as a going concern. If they do, and if a material uncertainty exists, the auditor then evaluates whether the financial statements (FS) adequately disclose that uncertainty.
Two outcomes trigger a modified opinion. If the going concern basis of accounting is inappropriate (the entity genuinely cannot continue operating) but management has prepared the FS on a going concern basis anyway, ISA 570.23 requires an adverse opinion. If material uncertainty exists and the FS do not include adequate disclosures about that uncertainty, ISA 570.24 requires a qualified or adverse opinion under ISA 705 .
ISA 570 (Revised 2024) adds a new layer. Under paragraphs 33 and 34, every auditor's report must now include either a "Going Concern" section (when no material uncertainty exists) or a "Material Uncertainty Related to Going Concern" section. For listed entities, the revised standard requires the auditor to describe how the going concern evaluation was performed, regardless of the conclusion reached.
Key Points
- A going concern opinion is not the same as a MURGC section. The MURGC section is an emphasis paragraph added to an unmodified opinion when disclosure is adequate. A qualified or adverse opinion applies only when disclosure is inadequate or the basis of accounting is wrong.
- When the going concern basis is inappropriate and management still uses it, the auditor issues an adverse opinion under ISA 570.23 .
- When material uncertainty exists but the FS do not disclose it adequately, the auditor modifies the opinion under ISA 705 .
- ISA 570 (Revised 2024) introduces a mandatory "Going Concern" section in the auditor's report for all engagements, making the auditor's conclusion explicit regardless of outcome.
Why it matters in practice
The distinction between a MURGC section and a modified opinion is where most teams go wrong. The FRC's 2024 Annual Enforcement Review identified going concern as a recurring theme in concluded audit investigations. Several cases involved failures to properly follow audit procedures regarding management's assessment, combined with failures to consider management's use of going concern assumptions critically. In our experience, teams that treat going concern as a tick box exercise (pull the prior-year working paper, update the numbers, sign off) are the ones who end up with a deficient report.
Consider a holding company with consolidated net debt of five times equity and a banking facility maturing in four months. Two loss-making subsidiaries drain cash. If management includes adequate going concern disclosures, the auditor's report carries a MURGC section with an unmodified opinion. If management omits the disclosure, the auditor must issue a qualified or adverse opinion. Same FS, different outcome. Reporting hinges entirely on disclosure quality.
A second common error is accepting management's representations at face value rather than independently testing them. A restructuring plan that has been presented to the board but not yet approved by works councils (where legally required) is not a reliable mitigating factor. The auditor must document the gap between management's assumptions and the evidence available, then assess whether that gap changes the going concern conclusion. Nobody enjoys pushing back on a CFO who says "the bank will roll over the facility," but the file should tell a story that a cold reader can follow without relying on verbal assurances. That is the whole point of the documentation requirement.
Key standard references
- ISA 570.21 covers the determination of whether events or conditions exist that cast significant doubt on the entity's ability to continue as a going concern.
- ISA 570.23 requires an adverse opinion when the going concern basis of accounting is inappropriate but management has used it.
- ISA 570.24 requires a qualified or adverse opinion when material uncertainty exists but the FS do not include adequate disclosures.
- ISA 705.7 through 705.9 provides the framework for modifications to the auditor's opinion, including qualified and adverse opinions triggered by going concern issues.
- ISA 570 (Revised 2024).33 and .34 introduce a mandatory "Going Concern" section in the auditor's report for all engagements.
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Frequently asked questions
What is the difference between a going concern opinion and a material uncertainty section?
They are different reporting elements. A material uncertainty section (MURGC) is added to an otherwise unmodified opinion when the entity has adequately disclosed the uncertainty. A going concern opinion — qualified or adverse — is issued only when the entity has not disclosed the material uncertainty adequately, or when the going concern basis of accounting is inappropriate but management has used it anyway.
When does the auditor issue an adverse going concern opinion?
The auditor issues an adverse opinion when the going concern basis of accounting is inappropriate — meaning the entity genuinely cannot continue operating — but management has still prepared the financial statements on a going concern basis. ISA 570.23 requires this. If the entity had used an alternative basis (such as liquidation basis), the adverse opinion would not apply.