What it is
Under US GAAP (ASC 205-40) management must evaluate, each reporting period, whether conditions and events raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date the financial statements are issued, or available to be issued. Under AU-C 570 the auditor evaluates management’s assessment and reaches their own conclusion.
This memo walks through the evaluation in order: conditions and events, management’s plans, whether the plans alleviate the doubt, the disclosure that follows and the effect on the auditor’s report.
When to use it
- On every audit, as the documented going concern conclusion (even when no conditions are found).
- When there are recurring losses, negative cash flows, covenant breaches, debt maturing within the look-ahead period or loss of a key customer or funding source.
- On reviews and compilations where the framework still requires management’s evaluation.
What’s inside
- Look-ahead period and the date the financial statements are issued / available to be issued
- Conditions and events checklist: financial, operating, external and other indicators
- Management’s plans, their feasibility and the evidence obtained for each
- Conclusion: no substantial doubt, substantial doubt alleviated, or substantial doubt remains
- Disclosure check, written representations, governance communication and report effect
Standard cited
This template follows AU-C 570 / ASC 205-40. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 570 explained.
Questions
What period does the going concern evaluation cover under US GAAP?
ASC 205-40 looks ahead one year after the date the financial statements are issued (or available to be issued, for entities that are not SEC filers). It is measured from the issuance date, not from the balance sheet date.
When can management’s plans alleviate substantial doubt?
Under ASC 205-40 the plans count only if it is probable they will be effectively implemented within the look-ahead period and probable that, once implemented, they will mitigate the conditions. If doubt is alleviated, the entity still discloses the conditions and the plans.
Does substantial doubt mean a modified opinion?
Not by itself. When substantial doubt remains and disclosure is adequate, AU-C 570 requires a separate section in the report headed for substantial doubt about the entity’s ability to continue as a going concern. A qualified or adverse opinion follows only if disclosure is inadequate, and a disclaimer may be considered in rare cases of multiple significant uncertainties.
Related templates
- Subsequent Events Checklist and Memo (AU-C 560 / ASC 855)
- Management Representation Letter (AU-C 580)
- Communication With Those Charged With Governance (AU-C 260)
Last updated 11/04/2026. All free templates.