Economic uncertainty and a handful of high-profile corporate failures in recent years have renewed scrutiny of how management and auditors assess, document, challenge, and communicate risks that could threaten an entity’s ability to continue operating.

This is not a new problem. The AICPA Auditing Standards Board (ASB) substantially revised AU-C section 570, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern (AU-C section 570), through SAS No. 132 in 2017. (See, “New Auditing Standard on Going Concern Effective Now,” Center for Plain English Accounting, Feb. 21, 2018.) The project significantly modernized AU-C section 570 and was largely driven by the need to align auditing requirements with FASB’s going concern accounting guidance in ASU 2014-15. In 2019, AU-C section 570 was amended by SAS 134, Auditor Reporting and Amendments, Including Amendments Addressing Disclosures in the Audit of Financial Statements and SAS No. 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA.

Subsequently, high-profile corporate failures and stakeholder concerns prompted the International Auditing and Assurance Standards Board (IAASB) to undertake a project to revise ISA 570. The resulting ISA 570 (Revised 2024), Going Concern, which strengthens auditor responsibilities and reporting related to going concern, takes effect for audits of periods beginning on or after Dec. 15, 2026.

The ASB, following its commitment to consider convergence with the ISAs as appropriate, commenced a project in August 2025 to determine whether targeted amendments to AU-C section 570 should be made to converge with certain selected aspects of ISA 570 (Revised 2024). The heightened attention lands at a time when rising interest rates, changing tariff and trade conditions, supply chain disruptions, and refinancing challenges have raised the risk of companies struggling to pay bills, payroll, debt payments, or other short-term commitments.

As an appeal to finance professionals and auditors not to let their guard down, we’re offering a refresher of two pieces of authoritative guidance anchoring the going concern assumption.

On the preparer side, FASB Accounting Standards Update No. 2014-15 added Subtopic 205-40, Presentation of Financial Statements — Going Concern, to the FASB Accounting Standards Codification, establishing for the first time an explicit U.S. GAAP requirement for management to evaluate going concern and to make related disclosures. (See sidebar, “Going Concern: A Brief History.”) Those provisions became effective for annual periods ending after Dec. 15, 2016. On the auditor’s side, AU-C section 570 sets out the auditor’s responsibilities for going concern related to the audits of nonissuers and other entities whose audits are conducted under GAAS rather than the standards of the Public Company Accounting Oversight Board.

This article walks through the distinct responsibilities these pieces of guidance assign, first to management as preparer, then to the auditor, and closes with the reporting consequences that follow from the auditor’s conclusions.

MANAGEMENT RESPONSIBILITIES RELATED TO GOING CONCERN

FASB places the going concern evaluation squarely with management of public and private nongovernmental entities alike. FASB rejected an earlier proposal to exempt entities that do not file financial statements with the U.S. Securities and Exchange Commission, reasoning that the need for clear disclosure guidance is just as relevant for private companies.

Performing the evaluation. In connection with preparing financial statements for each annual and interim reporting period, management must evaluate whether conditions and events, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern within one year after the issuance date (or the date available for issuance). The interim reporting period requirement is meaningful: This is not a once-a-year exercise. The evaluation is based on information known and reasonably knowable as of the issuance date, and it focuses on the entity’s ability to meet its obligations as they come due within one year after the date that the financial statements are issued.

In making the initial assessment, before considering any mitigating plans that have not been fully implemented, management considers both quantitative and qualitative information, including the entity’s current financial condition and liquidity sources; its conditional and unconditional obligations coming due within the year, whether or not they are recognized on the balance sheet; the funds needed to maintain operations in light of those obligations and expected cash flows; and any other conditions or events that, taken together with the foregoing, could adversely affect the entity’s ability to meet its obligations.

Examples of adverse conditions or events. Although a non-exhaustive list, the following offers examples of adverse conditions or events that may indicate substantial doubt. The existence of any one of these conditions or events does not by itself establish substantial doubt, nor does their absence rule it out:

• Negative financial trends such as recurring operating losses, working capital deficiencies, and negative operating cash flows;
• Other indicators of difficulty such as loan defaults, dividend arrearages, denial of normal trade credit, or a need to restructure debt;
• Internal matters such as work stoppages, dependence on a single project, or uneconomic long–term commitments; and
• External matters such as adverse legal proceedings, the loss of a key customer, supplier, franchise, or patent, or an uninsured catastrophe.

Management’s plans. When their initial assessment indicates substantial doubt, management then evaluates whether its plans intended to mitigate the relevant conditions or events will alleviate that doubt. Crucially, those plans count only to the extent that two conditions are both met: it is probable the plans will be effectively implemented, and it is probable that, once implemented, the plans will mitigate the conditions that raised the doubt. To be considered probable of implementation, a plan generally must have been approved by management (or others with appropriate authority) before the financial statements are issued. Plans that are not probable of implementation are disregarded, and a plan to satisfy obligations through liquidation is never treated as a mitigating plan—even if liquidation is itself probable. (See sidebar, “Key Terminology Related to Going Concern.”)

Disclosures when substantial doubt is alleviated. If substantial doubt would otherwise exist but is alleviated by management‘s plans, the entity must still disclose information enabling financial statement users to understand the principal conditions or events that raised the doubt (before considering the plans), management’s evaluation of their significance in relation to the entity’s ability to meet its obligations, and management’s plans that alleviated the substantial doubt about the entity’s ability to continue as a going concern. In the “Background Information and Basis for Conclusions” accompanying FASB ASU 2014-15, FASB viewed these “close call” disclosures as valuable because they let users judge for themselves how likely the plans are to succeed.

Disclosures when substantial doubt is not alleviated. If the doubt remains after considering management‘s plans, the entity must include an explicit statement in the financial statement footnotes that there is substantial doubt about its ability to continue as a going concern within one year after the issuance date. It must also disclose the principal conditions or events giving rise to the doubt, management’s evaluation of their significance, and management’s plans intended to mitigate them.

Subsequent periods. Where conditions continue to raise substantial doubt in later annual or interim periods, disclosures continue and should become more extensive as more information emerges, with appropriate context and continuity explaining how matters have changed. For the period in which substantial doubt no longer exists, the entity should disclose how the relevant conditions were resolved.

AUDITOR RESPONSIBILITIES RELATED TO GOING CONCERN

AU-C section 570 governs the auditor’s work related to going concern and applies to audits of complete sets of financial statements regardless of whether a general purpose or special purpose framework is used. Importantly, the auditor’s responsibilities apply even when the applicable financial reporting framework contains no explicit management evaluation requirement; the going concern assumption is fundamental to preparing financial statements either way.

The auditor’s objectives. Stated broadly, the auditor is required to obtain sufficient appropriate audit evidence about, and conclude on, the appropriateness of management’s use of the going concern basis of accounting; conclude whether substantial doubt exists for a reasonable period of time; evaluate the possible financial statement effects, including the adequacy of disclosure regarding the entity’s ability to continue as a going concern for a reasonable period of time; and report accordingly.

Risk assessment and staying alert. As part of obtaining an understanding of the entity in accordance with AU-C section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, the auditor considers whether conditions or events exist that raise substantial doubt and determines whether management has performed a preliminary evaluation of the entity’s ability to continue as a going concern. If management has performed their evaluation, the auditor should discuss it with management and determine whether management has identified any conditions or events that raise substantial doubt, and if so, understand management’s plans. If management has not performed the evaluation, the auditor should discuss the basis for using the going concern basis of accounting and inquire whether conditions or events exist that raise substantial doubt. And importantly, the auditor should remain alert throughout the engagement for evidence of conditions or events that raise substantial doubt.

Evaluating management’s assessment. The auditor‘s evaluation addresses management’s own assessment and should cover the same period management is required to use under the applicable financial reporting framework. If the framework imposes no explicit requirement, the auditor’s evaluation should relate to a period of time within one year after the issuance date (or within one year after the financial statements are available to be issued, when applicable). The auditor’s evaluation should also consider whether management’s assessment captures all relevant information of which the auditor has become aware during the audit. It is not the auditor’s responsibility to rectify a lack of analysis by management, but in some cases, such as an entity with a history of profitable operations and ready access to financing, the auditor may be able to conclude without a detailed management analysis. However, in situations in which management is required to make an evaluation about the entity’s ability to continue as a going concern, a lack of a detailed analysis when needed may be an indicator of a deficiency in internal control.

Additional procedures when conditions are identified. When conditions or events are identified, the auditor should obtain sufficient appropriate audit evidence by performing additional procedures, including consideration of mitigating factors. AU-C Section 570 includes examples of additional procedures that may be performed such as analyzing the entity’s latest interim financial statements, evaluating the entity’s plans to deal with unfilled customer orders, confirming the existence, terms, and adequacy of borrowing facilities, and performing procedures related to subsequent events that either mitigate or exacerbate substantial doubt.

The auditor should request management to perform an evaluation, if it has not already done so, and evaluate management’s plans against the same two-pronged probable test the preparer uses—whether the plans can be effectively implemented and whether they would mitigate the relevant conditions. Where a cash flow forecast is a significant factor, the auditor should evaluate the reliability of the underlying data and whether there is adequate support for the assumptions underlying the forecast, including searching for contradictory evidence.

Financial support from third parties or owner-managers. When management‘s plans rely on financial support from third parties or an owner-manager and that support is necessary, the auditor should obtain sufficient appropriate evidence of both the intent and the ability of the supporting party to provide the financial support. Intent should be evidenced in writing through a support letter or written confirmation. AU-C section 570 is clear: Failure to obtain that written evidence of intent constitutes a lack of sufficient appropriate audit evidence, and the auditor should conclude that management’s plans are insufficient to alleviate substantial doubt.

Written representations. If the auditor believes substantial doubt exists before considering management‘s plans, the auditor should request written representations describing those plans and the probability they can be effectively implemented, confirming that the financial statements disclose all matters relevant to the entity’s ability to continue as a going concern for a reasonable period of time as well as identified principal conditions or events and management’s plans that are intended to mitigate those conditions or events.

AUDITOR REPORTING CONSIDERATIONS RELATED TO GOING CONCERN

The auditor’s conclusions translate into specific reporting outcomes, and the path depends on whether the going concern basis of accounting is appropriate, whether substantial doubt remains, and whether financial statement disclosures are adequate.

Going concern basis is inappropriate. If the financial statements are prepared on the going concern basis but, in the auditor‘s judgment, that basis is inappropriate, for instance, when liquidation has become imminent and the liquidation basis should have been used, the auditor should express an adverse opinion. This holds regardless of whether the financial statements disclose the inappropriateness of the basis used.

Basis is appropriate but substantial doubt remains. When the use of the going concern basis is appropriate but substantial doubt persists after considering management’s plans, and financial statement disclosures are adequate, the auditor should include a separate section in the auditor’s report headed “Substantial Doubt About the Entity’s Ability to Continue as a Going Concern.” That section directs users’ attention to the relevant financial statement footnote, which describes the conditions or events, management’s plans, and indicates that substantial doubt exists. The section should also state that the auditor’s opinion is not modified with respect to the matter. The auditor must not use conditional language; phrasing such as “if the company continues to suffer losses, there may be substantial doubt” is inappropriate.

Substantial doubt alleviated by management’s plans. When identified conditions raise substantial doubt but the auditor concludes the doubt has been alleviated by management‘s plans and disclosures are adequate, the auditor may, but is not required to, include an emphasis-of-matter paragraph referring to management’s disclosures of the conditions and plans. This is distinct from the separate going concern section used when substantial doubt remains, and it is unavailable if the matter is a key audit matter or would require a modified opinion.

Inadequate disclosure. If the financial statements do not adequately disclose the going concern matter—whether substantial doubt remains or has been alleviated—the auditor expresses an adverse or qualified opinion, as appropriate, and explains the basis for the modification in the auditor’s report.

Management unwilling to evaluate or extend. If management refuses to perform or extend its evaluation to cover the required period when asked, the auditor considers the reporting implications, which may include a qualified or adverse opinion for a departure from the applicable financial reporting framework, and may also signal a deficiency in internal control.

Comparative and reissued reports. Substantial doubt arising in the current period does not imply a basis for doubt existed previously, so a going concern section is not added to a prior period merely on comparative presentation; and where doubt existed in a prior period but has since been removed, the prior-period going concern section is not repeated. If management asks the auditor to reissue a report and remove a going concern section after the underlying conditions are resolved—say, after needed financing is obtained—the auditor has no obligation to do so, but if the auditor agrees, the standard prescribes procedures to reassess the entity‘s status before reissuance.

Views expressed by ASB Board members and AICPA employees are expressed for purposes of deliberation, providing member services and other purposes exclusive of practicing public accounting. The views expressed do not necessarily represent the official views of the AICPA unless otherwise noted. Official AICPA positions are determined through certain specific committee procedures, due process and deliberation.

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Going concern: a brief history

Prior to the term “going concern” being formally integrated into professional standards in the 20th and 21st centuries, the going concern assumption was a firmly entrenched, yet often untested general assumption in external financial reporting. The going concern assumption was presumed (absent conditions or evidence to the contrary) and implicitly asserted by management in the absence of specific standards or regulatory obligations to do so.

Beginning around the mid-20th century, professional standards literature began to add going concern, but it sat almost entirely within the auditing standards. GAAP was still silent on whether management had an explicit obligation to evaluate the entity’s ability to continue, or to disclose the conditions and events that cast doubt on it.

Auditors were required to make a going concern assessment and to consider the adequacy of related disclosures, yet preparers had no parallel guidance telling them what to disclose or when. The result was predictable diversity in practice: footnote disclosures appeared at different thresholds, at different times, and in different forms. Such diversity existed until 2016 when the FASB’s adoption of going concern-related requirements into U.S. GAAP became effective.

Notably, however, the FASB declined to formally define “going concern” itself, concluding that a standalone definition would add little when the basis of accounting changes only at the point of imminent liquidation.

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Key terminology related to going concern

Core definitions include:

Going concern basis of accounting. According to FASB ASC 205-40, this is the default assumption that the entity will continue its operations for a reasonable period of time and will be able to realize its assets and settle its obligations in the ordinary course of business.

Liquidation and the liquidation basis of accounting. Liquidation is the process by which an entity converts its assets to cash, settles with creditors, and distributes anything left to its owners, in anticipation of ceasing all activities. When liquidation becomes imminent, the entity stops using the going concern basis and instead applies the liquidation basis of accounting under Subtopic 205-30 in the FASB Accounting Standards Codification. (See also, “Liquidation Accounting: When a Going Concern Dissolves,” JofA, Oct. 1, 2026)

Substantial doubt. According to FASB ASC 205-40, substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are issued (or are available to be issued, when applicable).

Probable.  Means the future event or events are likely to occur.

Financial statements issued versus available to be issued. Statements are “issued” when they are widely distributed to shareholders and other users for general reliance in a GAAP-compliant form. They are “available to be issued” when they are complete and in compliant form and all necessary approvals have been obtained.

Reasonable period of time. According to AU-C section 570, this is the period specified by the applicable financial reporting framework or, absent such a requirement, one year after the date the financial statements are issued or are available to be issued.

Reasonably knowable. A concept in ASC 205-40, “reasonably knowable” was added to make clear that management must make a reasonable effort to identify conditions it might not readily know but could uncover without undue cost and effort.

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About the authors

J. Gregory Jenkins, CPA, Ph.D., is the Ingwersen Professor of Accounting in the Harbert College of Business at Auburn University in Auburn, Ala. Laura Schuetze, CPA, is a Nashville, Tenn.-based partner in the assurance quality and risk group for Grant Thornton LLP and a partner for Grant Thornton Advisors LLC. Jenkins and Schuetze are members of the AICPA’s Auditing Standards Board and its Going Concern Task Force, which Schuetze chairs. Brian Wilson, CPA, CGMA, is senior director of audit and attest standards for the AICPA. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.

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MEMBER RESOURCES

Article

“The Importance of Going Concern Evaluation for Nonprofits,” Not-for-Profit section, Sept. 19, 2025

Podcast

“The Auditing Standards Board’s Priorities for 2026 and Beyond,” JofA, May 7, 2026

Websites

ASB Project: Going Concern

AICPA Auditing Standards Board (ASB)