- Issued by
- NFRA
- Series
- Auditor–Audit Committee Interactions, No. 6
- Topic
- SA 570 (Revised) — Going Concern
- For
- Auditors & audit committees
The short version
- NFRA has issued guidance on SA 570 (Going Concern) — the standard that asks whether a company can keep operating for the foreseeable future — to sharpen how auditors and audit committees engage on the issue.
- The key reminder: management owns the going-concern assessment (covering at least 12 months); the auditor evaluates it, not prepares it.
- The outcome drives the audit report — NFRA maps six distinct situations, from a clean opinion to an adverse one, depending on whether a material uncertainty exists and whether it's adequately disclosed.
- For audit committees, it's a prompt to probe going-concern assumptions under Section 177 — NFRA even supplies 35 questions they should be asking.
"Going concern" sounds like audit jargon, but it's one of the most consequential judgments in any set of financial statements — it's the assumption that the company will still be around to pay its debts and use its assets normally. NFRA's latest guidance is a push to make sure auditors and boards treat that judgment with the seriousness it deserves.
What SA 570 is about
SA 570 (Revised) governs the going-concern assessment. Financial statements are normally prepared on the assumption that the entity will continue in operation for the foreseeable future — realising its assets and settling its liabilities in the ordinary course. SA 570 requires the auditor to evaluate whether that assumption holds, to consider events or conditions that cast doubt on it, and to respond appropriately — including in the audit report.
Why NFRA issued this
This is the sixth in NFRA's "Auditor–Audit Committee Interactions" series — educational guidance meant to raise audit quality and promote informed discussion between auditors and those charged with governance. Going concern is singled out because it's forward-looking and judgment-heavy: the evidence is rarely conclusive, the stakes are high, and it's an area where weak assessments and thin disclosures have been a recurring concern.
Who is responsible for what
Management
Primary responsibility — makes the going-concern assessment, covering at least 12 months from the reporting date, and prepares disclosures.
The Board
Oversees and approves, ensuring the assessment and the financial statements reflect reality.
Audit Committee
Reviews the financials with particular attention to going-concern assumptions (Section 177), and challenges management and the auditor.
Statutory Auditor
Evaluates — not prepares — management's assessment, forms a view on material uncertainty, and reports accordingly.
The six reporting outcomes
This is the practical core of the guidance. What the auditor concludes decides the shape of the audit report:
| Situation | Audit report outcome |
|---|---|
| No events or conditions casting doubt | Unmodified — no going-concern section. |
| Events identified, but no material uncertainty | Unmodified — no MURGC section. |
| Material uncertainty exists, adequately disclosed | Unmodified — with a separate "Material Uncertainty Related to Going Concern" (MURGC) section. |
| Material uncertainty exists, inadequately disclosed | Qualified / Adverse opinion. |
| Going-concern basis is inappropriate | Adverse opinion. |
| An alternative acceptable basis is properly used | Unmodified — with an Emphasis of Matter. |
The crux: disclosure decides the opinion
Notice the pivot point. Once a material uncertainty exists, whether the opinion stays clean or turns into a qualification/adverse comes down to whether the company adequately discloses the principal events, the conditions and management's plans. Good disclosure keeps an unmodified opinion (with the MURGC section); inadequate disclosure forces a modification. That makes disclosure, not just the underlying facts, a board-level issue.
What this means for audit committees
NFRA puts real weight on the audit committee's role. Under Section 177 of the Companies Act, 2013, the committee is expected to review the financial statements with specific attention to the going-concern assumption — and the guidance arms it with a set of 35 questions, organised by situation (no events identified, events identified, material uncertainty exists, and so on), to put to the auditor. The message: don't treat going concern as a tick-box; interrogate the assumptions, the cash-flow basis, management's plans and the adequacy of disclosure.
Practical takeaways
- Management: build a documented, realistic assessment covering at least 12 months — with cash-flow projections and concrete plans, not boilerplate.
- Auditors: obtain sufficient appropriate evidence on that assessment, land clearly on the material-uncertainty question, and match the report to the right one of the six outcomes.
- Audit committees: use NFRA's question set; push hardest on disclosure adequacy where any uncertainty exists.
- Everyone: treat going concern as a live governance issue in stressed situations — weak disclosure is what turns a manageable uncertainty into a modified opinion.
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Talk to our teamDisclaimer: This article summarises NFRA's educational guidance on SA 570 (Going Concern) for general awareness and is current as at the date of publication. It is not a substitute for the standard itself, NFRA's guidance, or professional judgment. Auditors and audit committees should refer to SA 570 (Revised), the full NFRA material and applicable law. This is not professional advice — consult a qualified professional. Talk to efiletax if you need help.