CORAA
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University · SA 570 (Revised)

Going Concern Indicator Scorer.

Score the financial, operating and other indicators in SA 570 (Revised) Appendix A. Get opinion-form routing — EOM / Material Uncertainty / Adverse — and CARO 2020 clause (xix) impact.

Indicators (SA 570 App. A)
financial indicators
Net liability or net current liability position
Fixed-term borrowings approaching maturity without realistic refinancing prospects
Excessive reliance on short-term borrowings to finance long-term assets
Indications of withdrawal of financial support by creditors
Negative operating cash flows (historical or projected)
Adverse key financial ratios — debt/equity, interest coverage, current ratio
Substantial operating losses or significant deterioration in value of cash-generating assets
Arrears or discontinuance of dividends
Inability to pay creditors on due dates
Inability to comply with terms of loan agreements (covenant breach)
Change from credit to cash-on-delivery transactions with suppliers
Inability to obtain financing for essential new product development or other essential investments
operating indicators
Management intentions to liquidate or cease operations
Loss of key management without replacement
Loss of a major market, key customer(s), franchise, licence, or principal supplier(s)
Labour difficulties
Shortages of important supplies
Emergence of a highly successful competitor
other indicators
Non-compliance with capital or other statutory or regulatory requirements (e.g. solvency, liquidity)
Pending legal or regulatory proceedings against the entity that may result in unsatisfiable claims
Changes in law/regulation or government policy expected to adversely affect the entity
Uninsured or underinsured catastrophes when they occur
Auditor conclusion
Indicators present0 of 22
Unmitigated0
Net risk score0
Clear
Going concern basis appropriate. No EOM. SA 570 documentation only.

SA 570 (Revised) — auditor responsibilities.

SA 570 (Revised) — applicable to audits of financial statements for periods beginning on or after 1 April 2017 — requires the auditor to obtain sufficient appropriate audit evidence regarding, and conclude on, the appropriateness of management’s use of the going concern basis. The standard sets out four possible outcomes: (a) use of going concern is appropriate and no material uncertainty; (b) appropriate but material uncertainty exists; (c) management unwilling to make or extend its assessment; or (d) use of going concern is inappropriate.

CARO 2020 clause (xix) requires reporting on whether — based on the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financial statements, and the auditor’s knowledge of the board meetings and management plans — the auditor is of the opinion that no material uncertainty exists as on the date of the audit report that company is capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year.

On CORAA
The going concern checklist, ratio analysis and CARO clause (xix) opinion are integrated in CORAA — read SA 570, see CARO clause (xix).
SA 570 pageJE Testing Risk Scorer

How SA 570 going concern evaluation works

SA 570 (Revised) — "Going Concern" — requires the auditor to evaluate management's assessment of the entity's ability to continue as a going concern for a period of at least twelve months from the date of the financial statements. The going concern basis is fundamental to the preparation of financial statements; if the basis is inappropriate, assets and liabilities are recognised at realisable / settlement values, which can materially change the picture.

The standard provides illustrative indicators in Appendix A across three buckets — financial (net liability position, covenant breaches, negative cash flows, inability to pay creditors), operating (loss of key management or market, labour issues, supply shortages), and other (non-compliance with capital requirements, pending litigation, regulatory changes). The auditor identifies which indicators are present, evaluates management's mitigating actions, and concludes on whether a material uncertainty exists.

Four outcomes are possible: (1) use of going concern basis is appropriate and no material uncertainty exists; (2) it is appropriate but a material uncertainty exists — a "Material Uncertainty Related to Going Concern" paragraph is required; (3) management is unwilling to make / extend its assessment — qualified or disclaimer of opinion; (4) use of going concern basis is inappropriate — adverse opinion if the financial statements are nonetheless prepared on that basis.

Worked example — entity with covenant breach

A mid-sized manufacturing entity has breached its debt-service coverage ratio covenant. The bank has not yet called the loan but reserves the right to do so. Operating cash flows are positive but declining. Management is negotiating refinancing.

Inputs
Indicators identifiedCovenant breach (3), declining operating cash flows (2), refinancing risk (3)
Total indicator weight8
MitigationsRefinancing term sheet from another bank (mitigates 3 points)
Net unmitigated score5
Output
AssessmentMaterial uncertainty
Required opinion formUnmodified opinion + MU paragraph
CARO 2020 clause (xix)Reportable — flag uncertainty
Even with a refinancing term sheet, the uncertainty around whether the new facility will close, the bank's call option remaining live, and declining operating cash flows together cross the material uncertainty threshold. The audit report should include a Material Uncertainty Related to Going Concern paragraph (SA 570 paras 22-23), with cross-reference to the related note in the financial statements. CARO clause (xix) requires the auditor to specifically opine on whether no material uncertainty exists.

Common mistakes

Treating going concern as a tick-box at the planning stage
Going concern is a continuous evaluation. New evidence right up to the date of the auditor's report can change the assessment — e.g., a bank call-up, a major contract loss, a regulatory action. The conclusion is at the audit-report date, not the planning date.
Relying solely on management's assertions
SA 570 para 12 requires the auditor to evaluate management's plans for future actions — and assess whether the outcome of these plans is likely to improve the situation. Obtain corroborative evidence: signed term sheets, committed support letters, post-period-end performance, board minutes.
Missing CARO clause (xix) for non-statutory engagements
CARO 2020 clause (xix) applies to statutory audits only — but the going concern evaluation under SA 570 applies to all audits including limited reviews under SA 2410 (with appropriate modification).
Confusing material uncertainty with emphasis of matter
Material Uncertainty Related to Going Concern is a separate dedicated paragraph (not an EOM), with prescribed language under SA 570 para 22. It does not modify the opinion but is more prominent than an EOM.

Frequently asked questions

What is the going concern assumption?+
Under the going concern assumption, the entity is viewed as continuing in business for the foreseeable future. Financial statements are prepared on the basis that the entity has neither the intention nor the necessity of liquidation or curtailing materially the scale of its operations. If the assumption is inappropriate, FS should be prepared on a liquidation basis with assets at NRV and liabilities at settlement values.
What is the foreseeable future under SA 570?+
SA 570 requires assessment for a period of at least twelve months from the date of the financial statements. Para A11 notes that the period may need to be longer in certain circumstances (e.g., long-term operating cycle, regulatory requirements).
What is a "material uncertainty" related to going concern?+
A material uncertainty exists when the magnitude of its potential impact and likelihood of occurrence are such that, in the auditor's judgement, appropriate disclosure of the nature and implications of the uncertainty is necessary for the fair presentation of the financial statements. Below this threshold, disclosure may not be required and no paragraph is added.
When is a disclaimer of opinion appropriate for going concern?+
When management is unwilling to make or extend its going concern assessment despite the auditor's request, SA 570 para 17 indicates the auditor should consider the implications for the report, which may include a disclaimer or qualified opinion due to a scope limitation.
How does CARO 2020 clause (xix) interact with SA 570?+
Clause (xix) requires the auditor to specifically state, based on financial ratios, ageing and expected dates of realisation, and knowledge of board meetings and management plans, whether any material uncertainty exists regarding the company's capability of meeting its liabilities existing at the date of the balance sheet as and when they fall due within a period of one year. This is a positive assertion in CARO, separate from the SA 570 paragraph.
Are subsequent events relevant?+
Yes. SA 560 (Subsequent Events) and SA 570 work together. Events between the date of the financial statements and the date of the auditor's report that bear on the going concern assessment must be considered — both adjusting and non-adjusting events under Ind AS 10 / AS 4.
What if going concern issues emerge after the audit report is signed?+
SA 560 paras 10-13 apply — the auditor has no obligation to perform procedures regarding the financial statements after the date of the auditor's report. However, if facts become known to the auditor that, had they been known at the date of the auditor's report, may have caused the report to be amended, the auditor must discuss with management and take action under SA 560.

Authoritative sources

SA 570 (Revised) — Going Concern (ICAI AASB) — Read alongside SA 560 (Subsequent Events), SA 705 (Modifications to the Opinion), and CARO 2020 clause (xix).
Always confirm against the latest version of the source. Regulations evolve and amendments are common.
Related calculators
SA 570 page →SA 560 — Subsequent Events →CARO clause (xix) →JE Risk Scorer →
Last reviewed: 2026-05-28 · For informational purposes only — not professional advice.