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FRC issues revised Going Concern audit standard (ISA 570)

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01 Oct 2019

The Financial Reporting Council has issued revisions to International Standard on Auditing (ISA) (UK) 570 'Going Concern'. The revisions increase the work that auditors are required to do when assessing whether an entity is a going concern.

The revisions have been made in response to recent enforcement cases and a number of corporate failures where the auditor’s report failed to highlight concerns about the prospects of entities which collapsed shortly after.

The revised standard requires:

  • greater work on the part of the auditor to more robustly challenge management’s assessment of going concern, thoroughly test the adequacy of the supporting evidence, evaluate the risk of management bias, and make greater use of the viability statement;
  • improved transparency with a new reporting requirement for the auditor of public interest entities, listed and large private companies to provide a clear, positive conclusion on whether management’s assessment is appropriate, and to set out the work they have done in this respect; and
  • a stand back requirement to consider all of the evidence obtained, whether corroborative or contradictory, when the auditor draws their conclusions on going concern.

As a consequence of introducing the new standard, the FRC has withdrawn  Bulletin 2008/01 Audit issues when financial market conditions are difficult and credit facilities may be restricted and Bulletin 2008/10 Going concern issues during the current economic conditions.

ISA (UK) 570 is effective for audits of financial statements for periods commencing on or after 15 December 2019. Early adoption is permitted. 

The FRC press release and the revised standard are available on the FRC website.

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