Going Concern Checklist for Hospitality
Tailored going concern assessment for hotels, restaurants, and hospitality entities. Covers industry-specific indicators including occupancy rates, seasonal cash flow patterns, debt covenants, and franchise compliance.
Engagement context
Set the entity details for your working paper. The assessment period is calculated per ISA 570.3.
Indicators
Check all indicators that apply to the entity. 21 indicators from ISA 570.A2/A7 including ISA 570 (Revised 2024) additions. Expand any indicator to see working paper guidance and the likely review challenge.
ISA 570 Going Concern Reference Card: free PDF
One page for your planning folder: the indicator severity matrix, ISA 570.3 assessment period checklist, draft MURGC paragraph, ISA 570.16–.19 evidence requirements, and a summary of the key ISA 570 (Revised 2024) changes effective December 2026. Plus one practical audit insight per week.
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How the score works
Each indicator is weighted by severity: High = 3 points, Medium = 2 points, Low = 1 point.
Assessment levels are determined by two criteria (whichever is met first):
- Substantial doubt: ≥2 high-severity indicators OR weighted score ≥8
- Significant concern: ≥1 high-severity indicator OR weighted score ≥4
- Limited concern: Weighted score ≥1
- No indicators: Score = 0
The 21 indicators are sourced from ISA 570.A2 (current) and ISA 570 (Revised 2024) A7, covering financial, operating, and other categories.
This scoring is a starting point for professional judgment. The auditor must consider entity-specific circumstances, industry context, and the collective effect of indicators when forming a conclusion.
ISA 570.9: The auditor shall evaluate management's assessment of the entity's ability to continue as a going concern.
ISA 570.A2/A7: Events or conditions that may cast significant doubt include financial, operating, and other indicators.
ISA 570.16: If events or conditions have been identified, the auditor shall obtain sufficient appropriate audit evidence about whether a material uncertainty exists.
Going concern assessment: Hospitality
Hospitality entities — hotels, restaurants, event venues, and tourism operators — are highly sensitive to economic cycles, seasonal demand patterns, and external disruptions (pandemics, travel restrictions, geopolitical events). The combination of high fixed costs (property, staff), perishable inventory (unsold room nights cannot be recovered), and seasonal cash flow concentration creates a business model where going concern risk can emerge rapidly.
Key risk factors: Hospitality
Key hospitality going concern indicators include: occupancy rates or average daily rates (ADR) falling below breakeven levels, inability to meet debt service obligations on property financing, seasonal cash flow shortfalls where the off-season burn rate exceeds available reserves or credit lines, franchise agreement non-compliance (brand standards, renovation requirements), loss of key contracts (corporate accounts, tour operator agreements), and escalating labour costs without corresponding rate increases.
Occupancy rate and RevPAR trends — compare to both the entity's breakeven occupancy and to competitive set (comp set) performance. Underperformance versus the market suggests entity-specific rather than market-wide problems.
Debt covenants on property financing — hospitality debt typically includes DSCR (debt service coverage ratio) and LTV covenants. Covenant breaches can trigger acceleration clauses that crystallise going concern risk.
Seasonal cash flow modelling — assess whether the entity's cash reserves or credit facilities are sufficient to cover the off-season operating deficit until peak season cash generation resumes.
Capital expenditure obligations — franchise agreements and brand standards may require periodic renovation (property improvement plans). Inability to fund these creates a risk of franchise termination.
Forward booking data — unlike other industries, hospitality has leading indicators in forward reservations. A significant decline in advance bookings signals future revenue shortfalls.
Labour market and staffing — hospitality relies on seasonal and part-time workers. Wage inflation, minimum wage increases, or inability to staff adequately directly impacts both cost structures and service quality.