Going concern remains one of the areas auditors are expected to examine closely.

For boards, the practical effect is straightforward: the going concern assessment needs to be prepared early, supported with evidence and capable of being explained. What is prepared before audit fieldwork begins can make the audit process smoother and the conclusion easier to support.

The Financial Reporting Council published updated guidance on the going concern basis of accounting and related reporting, including solvency and liquidity risks, on 25 February 2025. The FRC also published revised ISA (UK) 570, Going Concern, on 30 April 2026, effective for audits of financial statements for periods commencing on or after 15 December 2026.

You can read the FRC’s guidance here: Guidance on the Going Concern Basis of Accounting and Related Reporting. The revised auditing standard is available here: ISA (UK) 570.

The board remains responsible for the going concern conclusion. The auditor’s role is to test the assessment, challenge the assumptions and consider whether the financial statements and disclosures are appropriate.

Why going concern needs early attention

A going concern assessment can become difficult when it is treated as an audit request rather than a board judgement.

An assessment that felt straightforward when the business was smaller or conditions were stable may need more evidence as the company grows, takes on funding, faces tighter margins or manages less certain cash flow.

Recent FRC guidance and revised auditing standards have kept going concern under close attention. The expectation is not simply that directors reach a conclusion. It is that the conclusion is supported by a robust and well-documented assessment.

That matters because going concern is not only an audit issue. It is connected to cash-flow visibility, funding headroom, covenant compliance, forecasts, mitigating actions and the board’s understanding of risk.

Start with the assessment period

One of the first questions to resolve is the period covered by the going concern assessment.

The FRC guidance summarises the minimum periods directors need to consider. Under FRS 102, companies are required to consider at least 12 months from the date the financial statements are authorised for issue. Under IFRS Accounting Standards, the period is at least 12 months from the end of the reporting period. For companies applying the UK Corporate Governance Code, the period is at least 12 months from the date of approval of the financial statements.

The FRC guidance also notes that, in the UK, auditors are required to consider at least 12 months from the date the financial statements are authorised for issue. As a result, boards should agree the relevant period early and make sure the forecast covers it properly.

The minimum period does not mean the board should ignore significant events beyond it. Debt repayments, covenant tests, refinancing deadlines, major contracts or planned restructuring may require a longer view.

The FRC guidance is aimed at UK companies within its scope and excludes small companies and micro-entities, for which separate FRC factsheet guidance is available. However, the wider principle remains relevant: the going concern conclusion should be supported by clear evidence, realistic assumptions and proper board consideration.

What boards should have ready

A good going concern file does not need to be complicated, but it should be organised.

Before fieldwork begins, boards should usually be ready to provide:

• A cash-flow forecast covering the full assessment period.
• A clear explanation of the assumptions used.
• Evidence supporting key inputs, such as revenue, margins, payroll, overheads and working capital.
• Details of borrowing facilities, repayment dates and covenants.
• Sensitivity analysis or downside scenarios.
• Evidence behind any mitigating actions management is relying on.
• Board papers or minutes showing how the assessment was reviewed.
• A clear conclusion on whether the going concern basis remains appropriate.

The aim is not to create a large pack of documents for its own sake. It is to show that the board has considered the position properly and can explain the conclusion.

Forecasts need to be more than a spreadsheet

A cash-flow forecast is usually central to the going concern assessment.

However, the forecast is only useful if the assumptions behind it are realistic and supported. Auditors are likely to ask how the forecast was prepared, whether it agrees to current trading information and whether management’s assumptions are consistent with other information available to the business.

Boards should be prepared to explain matters such as:

• How revenue assumptions have been set.
• Whether margins reflect current trading conditions.
• How debtor collection has been forecast.
• Whether cost increases have been included.
• How payroll, VAT, Corporation Tax or other tax payments have been treated.
• Whether capital expenditure or debt repayments have been included.
• Whether the forecast has been compared against recent actual performance.

A forecast that shows sufficient headroom may still attract questions if the assumptions are not well supported.

Downside scenarios and mitigating actions

A positive base case is rarely enough on its own.

Boards should consider what happens if trading is weaker than expected, customers pay more slowly, costs rise, funding is delayed or a key contract is lost. The downside scenarios should be realistic, not extreme for the sake of it.

The same applies to mitigating actions.

If management is relying on cost reductions, delayed expenditure, additional funding, shareholder support or revised payment terms, there should be evidence that those actions are realistic and available when needed.

Useful evidence may include:

• Board-approved cost reduction plans.
• Facility letters or renewal discussions.
• Written confirmation of shareholder or group support, where relevant.
• Covenant calculations.
• Customer pipeline evidence.
• Updated trading results after the year end.
• Correspondence with lenders or funders.

The stronger the evidence, the easier it is for the board and the auditor to understand whether the conclusion is supportable.

Borrowing facilities, covenants and refinancing

Borrowing arrangements often sit at the centre of going concern work.

Where the business relies on an overdraft, invoice finance, loan facility or group support, the board should review whether the facility remains available throughout the assessment period. It should also consider whether covenants are likely to be met under both base case and downside scenarios.

Common areas that need early attention include:

• Facilities due to expire during the assessment period.
• Covenant tests close to being breached.
• Reliance on lender waivers or renewals.
• Assumptions about future funding not yet agreed.
• Group support that has not been documented clearly.

These matters are much easier to deal with before fieldwork than during the final stages of the audit.

Board minutes and evidence of challenge

The going concern conclusion should not appear to be a finance-team exercise that the board simply approved at the end.

Board minutes should show that directors reviewed the assessment, considered the main assumptions, understood the risks and reached a conclusion. Where there are significant judgements, the reasoning should be clear.

This is particularly important where the conclusion involves uncertainty but the board has determined that the going concern basis remains appropriate.

Good documentation may show:

• What information the board reviewed.
• Which assumptions were challenged.
• What downside scenarios were considered.
• What mitigating actions were assessed.
• Whether any material uncertainties were identified.
• How the final conclusion was reached.

The board remains responsible for the judgement, so the evidence should show the board’s involvement.

Questions to ask before fieldwork begins

A practical review before audit fieldwork can reduce late pressure.

Useful questions include:

• Does the forecast cover the correct assessment period?
• Are the key assumptions documented and supported?
• Does the forecast agree with current trading information?
• Have borrowing facilities, repayment dates and covenants been reviewed?
• Have realistic downside scenarios been tested?
• Is there evidence behind the mitigating actions being relied on?
• Do board papers and minutes show how the conclusion was reached?
• Are any material uncertainties being considered clearly?
• Are there cash-flow pressures that should be addressed before fieldwork?

These questions help move going concern from a deadline-driven audit task to a properly supported board assessment.

How this supports better decision-making

It would be easy to treat going concern as an audit hurdle.

The more useful view is that a rigorous assessment gives the board a clearer understanding of the company’s resilience.

Working through the assessment can highlight pressure on working capital, weaknesses in forecasting, limited funding headroom, covenant risk or assumptions that need closer review. Understanding these issues early can support better decisions on funding, investment, cost control and financial planning.

The auditor does not take responsibility away from the board. However, a clear audit process can help directors understand which financial reporting issues require attention.

A robust assessment does not guarantee a clean audit opinion, and a positive conclusion does not remove all uncertainty. What thorough preparation offers is a well-evidenced position the board can stand behind and explain.

Final thought

Going concern is about more than preparing a forecast for the audit file.

It is a board judgement that needs to be supported by evidence, realistic assumptions and clear documentation. For most boards, the sensible response is to prepare early, agree the assessment period, test the downside, document the mitigating actions and record how the conclusion was reached.

Handled in good time, going concern becomes a well-evidenced assessment rather than a source of late audit pressure.

Accendo supports growing businesses and organisations with audit readiness, financial reporting and advisory work where clear evidence, realistic assumptions and well-documented board judgements matter. Preparing the going concern assessment before fieldwork begins can help reduce late audit pressure and give the board a stronger basis for its conclusion. 

This article is for general information only and reflects the FRC position at the date of publication. It should not be treated as legal, accounting, tax, transaction, investment or governance advice. You should obtain specific advice based on your organisation’s circumstances.