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 announced the final ISA (UK) 570 (Revised March 2026), 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.
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.
A forecast period example
If the accounts are expected to be approved on 30 November 2026, a forecast stopping at 31 December 2026 is not enough to cover 12 months from approval. Extend the assessment at least to 30 November 2027, and update it if approval is delayed. Consider relevant events beyond the minimum period as well.
A support letter is only part of the evidence
Where the conclusion relies on a parent or shareholder, assess both their intention and ability to provide the required support when needed. An unsigned letter or an unsupported promise does not demonstrate available funding. Agree the evidence with the auditor early.
Discuss your next step
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Reviewed 26 September 2026. General guidance; the appropriate approach depends on your organisation and circumstances.
Related guide: How to make the next audit easier to manage.