Revised ISA 570: Strengthening Auditor Responsibilities for Going Concern

Introduction

The revised International Standard on Auditing (ISA) 570 marks a significant shift in how auditors assess and report on an entity's ability to continue as a going concern. Released by the IAASB in 2024 and effective for audits of periods beginning on or after December 15, 2026, the updated standard responds to a global call for greater audit transparency, especially after several high-profile collapses exposed blind spots in financial oversight. Auditors are now expected to dig deeper, think more critically, and report more clearly.

Why Going Concern Matters More Than Ever

Going concern isn't just an accounting technicality—it's the lifeblood of financial stability. If an organization can’t sustain operations for the next 12 months, investors, creditors, and employees all deserve to know. Yet in a post-pandemic economy riddled with inflation, geopolitical uncertainty, and rapid disruption, determining whether a business will survive that window has become more complex than ever.

High-profile collapses like Wirecard, Carillion, and Greensill underscored how flawed or overly optimistic assumptions—often unchecked by auditors—can lead to a failure in anticipating insolvency. In some cases, auditors failed to challenge management’s projections; in others, disclosures didn’t sufficiently reflect existential risks. These oversights can erode market trust and have cascading impacts on stakeholder confidence.

Auditors must now consider not only traditional indicators (e.g., liquidity ratios, debt covenants, net operating losses), but also emerging risks like digital disruption, ESG litigation, or geopolitical exposure. Going concern isn’t just about accounting anymore—it's about strategic foresight.

Key Revisions in ISA 570 (Revised)

The new ISA 570 significantly upgrades audit requirements in several key areas:

• Timely Risk Identification: Auditors are now required to identify and assess events or conditions—financial and non-financial—that may cast significant doubt on an entity’s going concern status much earlier in the audit.
• Management Assessment Evaluation: ISA 570 requires the auditor to critically evaluate the assumptions, sensitivity analyses, and stress tests performed by management—particularly looking for management bias or overly optimistic forecasting.
• Material Uncertainty Disclosure: The revised standard tightens expectations on how auditors disclose material uncertainties, including new wording requirements to make such flags clearer and more consistent across audit reports.
• Documentation and Skepticism: Auditors must now document not just what management said, but how they challenged it. This includes reviewing contradictory evidence and documenting their professional skepticism throughout the process.
• Enhanced Reporting Standards: Where a material uncertainty exists, the audit opinion must reflect this prominently. Gone are the days of vague language and buried warnings. Transparency is non-negotiable.

What Auditors Must Now Do Differently

Under the previous regime, many audits relied heavily on management’s representations, often without deep challenge. The revised ISA 570 demands a shift in mindset and execution. Here’s what’s changed:

• Early Engagement: Auditors must begin going concern evaluations much earlier in the audit timeline, not as an end-stage checkbox.
• Evidence Beyond the Balance Sheet: It’s not enough to analyze financial ratios. Auditors are expected to assess strategic risks—such as customer concentration, supply chain instability, or tech obsolescence—that could jeopardize future viability.
• Scenario Testing: Auditors must scrutinize multiple what-if scenarios and evaluate the robustness of management's mitigation plans under each. If revenue drops 30%, does the business still stand?
• Disclosures and Language: New template language for the auditor’s report ensures stakeholders get a clearer signal when going concern issues exist. Vague phrases like “might be of concern” no longer suffice.
• Audit Committee Communication: Auditors are required to hold more candid discussions with audit committees, particularly if they believe management is downplaying material risks.

Comparison with Other Standards and Frameworks

The changes in ISA 570 reflect a broader international trend toward tightening audit accountability, but variations remain across jurisdictions.

• PCAOB (U.S.): U.S. auditors follow PCAOB AS 2415, which similarly requires evaluating substantial doubt about going concern. However, the ISA 570 now mandates deeper documentation and more transparency in reporting, which may be viewed as more prescriptive than its U.S. counterpart.
• IFRS vs. U.S. GAAP: Under IFRS, management is required to disclose material uncertainties about going concern. U.S. GAAP is more principle-based, relying on qualitative judgments. Auditors must navigate these frameworks while aligning with ISA 570’s emphasis on consistency and rigor.
• Corporate Governance Codes: Some jurisdictions, such as the UK Corporate Governance Code, place direct responsibilities on directors to assess and report on going concern, which the auditor must then evaluate critically. This is not universal, and misalignments still exist globally.

Case Study: Carillion & Other Corporate Failures

Carillion’s 2018 collapse stunned regulators and the audit profession alike. Despite red flags—spiraling debt, delayed contracts, and unrealistic revenue projections—the company maintained a going concern status until days before administration. The auditors failed to adequately challenge management’s assumptions or disclose material uncertainties in their report.

Parallels exist with Wirecard (Germany), where revenue fraud went unchecked despite a decade of warning signs, and with Thomas Cook (UK), where liquidity risks were downplayed publicly. In each case, insufficient auditor skepticism, weak disclosure practices, and poor governance contributed to stakeholder harm.

The revised ISA 570 aims to ensure that such oversights are no longer possible—at least not without clear accountability.

How Technology Can Support Better Going Concern Assessment

Modern audit tools can significantly improve the robustness of going concern evaluations:

• Predictive Analytics: Platforms like MindBridge and CaseWare allow auditors to analyze millions of transactions and build risk models that flag anomalies indicative of distress.
• Real-Time Monitoring: Continuous auditing tools can alert audit teams to shifts in liquidity, receivables, or payroll outflows—factors closely tied to going concern risks.
• AI-Driven Scenario Modeling: Emerging tools can simulate various future business conditions based on market trends, financial inputs, and operational risk data. This goes beyond static spreadsheets and into real-time, AI-assisted foresight.
• External Data Integration: Platforms can now ingest social sentiment, supplier distress signals, or ESG litigation alerts—providing a more holistic risk view for auditors.

Governance Implications for Audit Committees and Boards

The revised ISA 570 isn’t just an auditor issue—it changes the game for boards and audit committees too. Risk oversight must now include a deep understanding of going concern signals, assumptions, and audit conclusions.

• Challenging Management: Boards must now be ready to interrogate management’s assumptions. Are revenue forecasts grounded in reality? Are cost savings credible or speculative?
• Internal Audit Alignment: Internal audit functions should align with external auditors on red-flag areas and support continuous monitoring of going concern threats.
• Transparent Board Minutes: Regulatory reviews increasingly scrutinize board meeting minutes. If going concern risks are raised, the board must document how they responded.
• Training and Tech Literacy: Boards must understand the tools auditors use to assess going concern—and their limitations. Blind trust in AI outputs without human judgment is a governance failure in itself.

Conclusion: From Compliance to Confidence

The revised ISA 570 signals a new era for audit integrity. It transforms going concern from a passive checklist to a proactive process requiring critical judgment, deep analytics, and transparent communication. For auditors, the message is clear: challenge, document, and disclose. For boards, it’s an invitation to become active stewards of financial resilience.

Ultimately, the goal is not just compliance—but confidence. Confidence for investors that risk is being honestly reported. Confidence for regulators that auditors are upholding their duty. And confidence that when things go wrong, no one is left in the dark.