Going Concern Checklist for Manufacturing
Tailored going concern assessment for manufacturing entities. Covers industry-specific indicators including production capacity, supply chain dependencies, and inventory obsolescence risk.
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: Manufacturing
Manufacturing entities face going concern risks that are closely tied to production economics, supply chain stability, and demand cycles. A downturn in orders, a disruption in raw material supply, or a loss of a major customer can rapidly erode the financial position. The capital-intensive nature of manufacturing means that fixed costs remain high even when volumes decline, accelerating cash burn during downturns.
Key risk factors: Manufacturing
Key going concern indicators specific to manufacturing include: declining order backlog or loss of key customers, inability to pass on raw material cost increases, production facility obsolescence requiring major capital expenditure, excessive inventory build-up suggesting demand weakness, and dependency on a single supplier or customer representing more than 20–30% of activity. Covenant breaches on asset-based lending facilities are particularly relevant because manufacturing entities frequently use inventory and receivables as collateral.
Order backlog trends are a leading indicator — a declining backlog over two or more quarters signals potential revenue shortfall that may affect the entity's ability to cover fixed costs.
Raw material price exposure — if the entity cannot pass on cost increases to customers (common in long-term fixed-price contracts), margin compression can rapidly erode working capital.
Capital expenditure requirements — ageing production equipment may require replacement, but if the entity lacks the cash flow or borrowing capacity to fund it, operational capability deteriorates.
Customer concentration risk — loss of a single customer representing more than 15–20% of revenue can trigger a going concern assessment, particularly if contracts are short-term or subject to rebidding.
Inventory ageing analysis should be examined — significant build-up of finished goods or slow-moving raw materials may indicate demand problems and future write-down requirements.
Workforce availability and labour relations — manufacturing depends on skilled labour, and strikes, wage disputes, or inability to recruit can halt production and cash generation.