Going Concern: What It Means for Auditors and Finance Teams

Going concern is one of the most important concepts in financial reporting and auditing. It affects how financial statements are prepared, what management must assess, and what auditors must evaluate — and it has taken on heightened importance in uncertain economic times. This guide explains what going concern means, the responsibilities of management and auditors, and why it matters — in clear, plain language for finance teams and anyone studying or working in audit. It complements our ACCA Audit and Assurance guide. Standards in this area evolve, so refer to the current standards for authoritative detail.

What is going concern?

Going concern is the assumption that an entity will continue to operate for the foreseeable future — that it won't be liquidated or forced to cease trading. This assumption is fundamental to how financial statements are normally prepared: under the going concern basis, assets and liabilities are recorded on the expectation that the business will continue and realise its assets and settle its liabilities in the normal course of business. If, instead, an entity is not a going concern, its financial statements may need to be prepared on a different basis, which can significantly change how items are measured and presented. So the going concern assessment is a foundational judgement underpinning the accounts.

Management's responsibility

The primary responsibility for assessing going concern rests with an entity's management (and those charged with governance). When preparing the financial statements, management must assess the entity's ability to continue as a going concern, considering relevant information about the future. If there are material uncertainties that may cast significant doubt on the entity's ability to continue, these generally need to be disclosed. And if management concludes the entity is not a going concern, the financial statements should reflect that. This assessment requires careful judgement, drawing on forecasts, plans, financing arrangements and the wider circumstances of the business, and it can be especially demanding in difficult economic conditions.

The auditor's responsibility

Auditors have an important responsibility in relation to going concern too. The auditor must evaluate management's assessment of the entity's ability to continue as a going concern, and consider whether there are events or conditions that may cast significant doubt on it. The auditor gathers evidence, considers management's plans and forecasts, and forms a view. Depending on what they find, the auditor's report may need to reflect going concern matters — for example, drawing attention to a material uncertainty that has been appropriately disclosed, or modifying the opinion where the accounting or disclosure is inadequate. Going concern is therefore a key area of audit focus, and one that has attracted significant attention and scrutiny.

Going concern in difficult times

Going concern assessments become particularly challenging during periods of economic stress — such as downturns, financial shocks or major disruption to a business or its sector. In such conditions, forecasting becomes harder, financing can be less certain, and the risk of significant doubt over a business's future rises. This puts greater pressure on management to make robust, well-supported assessments, and on auditors to scrutinise them carefully. It also makes clear, honest disclosure of any material uncertainties all the more important for users. The heightened focus on going concern in recent years reflects just how critical this judgement becomes when the economic outlook is uncertain.

Why going concern matters

Going concern matters because it goes to the heart of whether financial statements can be relied upon. The basis on which accounts are prepared — and the disclosure of any significant doubts — is vital information for users such as investors, lenders and other stakeholders, who need to understand whether a business is expected to continue. Getting going concern wrong — whether by failing to identify a problem or by failing to disclose a material uncertainty — can seriously mislead users. For finance teams, management and auditors alike, taking going concern seriously is essential. Because the requirements and expectations in this area continue to develop, it's important to refer to the current accounting and auditing standards for authoritative guidance.

Frequently asked questions

What does going concern mean?

The assumption that an entity will continue operating for the foreseeable future, rather than being liquidated or ceasing trading — the basis on which financial statements are normally prepared.

Who is responsible for assessing going concern?

Primarily the entity's management and those charged with governance, who must assess the entity's ability to continue and disclose any material uncertainties.

What is the auditor's role?

To evaluate management's going concern assessment, consider whether events or conditions cast significant doubt, and reflect going concern matters in the auditor's report where appropriate.

Why does going concern matter?

It affects the basis on which accounts are prepared and gives users vital information about whether a business is expected to continue — getting it wrong can seriously mislead users.

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