# SA 570 – GOING CONCERN (CA FINAL JAN 2026 REVISION NOTES)
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## DEFINITION & OBJECTIVE
**Going Concern (GC):** Entity will continue operations & realize assets/discharge
liabilities in normal course for ≥12 months from reporting date.
**Auditor's Objectives:** (E³)
- **Ensure** GC basis appropriateness
- **Evaluate** existence of Material Uncertainty (MU)
- **Express** conclusion in audit report
---
## MANAGEMENT RESPONSIBILITY (ABCD)
| Duty | Key Point |
|------|-----------|
| **Assess** | Formal GC assessment for ≥12 months (extend if needed) |
| **Basis** | Choose correct basis: GC or Liquidation |
| **Communicate** | Identify events/conditions & mitigation plans |
| **Disclose** | MU, plans, and principal conditions in FS notes |
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## AUDITOR RESPONSIBILITY (RECR)
- **Risk Assess** → Identify indicators of GC doubt
- **Evaluate** → Reasonableness of management's assessment & assumptions
- **Conclude** → GC appropriate? MU exists? Disclosure adequate?
- **Report** → Modify opinion / include MURGC paragraph / standard report
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## GC INDICATORS (FOO)
### Financial
- Recurring losses / Negative net worth / Negative working capital
- Negative operating cash flows
- **Loan defaults / Covenant breaches / Overdue creditors**
- Loans nearing maturity → No refinancing prospect
### Operational
- Loss of key customer / supplier / market
- Labour issues / Shortage of key inputs
- Obsolete products / Tech changes not addressed
- Dependence on few products/markets
### Other
- Legal cases / Regulatory penalties / Non-compliance
- Natural disasters / Political instability / Pandemics
- Change in law affecting operations
---
## AUDITOR'S PROCEDURES (DESW)
When indicators exist:
1. **Discuss** with management → Understand assessment & plans
2. **Evaluate Plans** → Cost cuts? New finance? Restructuring? Support letter?
- Check cash-flow forecasts → data & assumption reliability
- Inspect: Loan sanctions, board minutes, letters of support
3. **Support** → Review subsequent events (till report date)
4. **Written Representation** → On GC, plans, feasibility
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## MATERIAL UNCERTAINTY RELATED TO GC (MURGC) – REPORTING MATRIX
| Scenario | GC Basis? | MU? | Disclosure? | **Opinion** | **Action** |
|----------|-----------|-----|-------------|-----------|-----------|
| Normal case | ✓ Yes | ✗ No | — | **Unmodified** | No MURGC para |
| **MURGC Case** | ✓ Yes | ✓ Yes | ✓ Adequate | **Unmodified** | **Add MURGC
section** |
| Inadequate disclosure | ✓ Yes | ✓ Yes | ✗ Inadequate | **Qualified/Adverse** |
Basis para + opinion mod |
| Wrong basis (liquidation) | ✗ No | — | — | **Adverse** | Fundamentally wrong
basis |
| Scope limitation | ? Unable to evaluate | — | — | **Qualified/Disclaimer** |
Limitation of scope para |
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## MURGC SECTION – CONTENT (When Unmodified + MU)
```
Material Uncertainty Related to Going Concern
[Reference to FS note describing MU]
As noted in Note X, [describe principal conditions/events causing MU].
These conditions indicate that a material uncertainty exists related to
the entity's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
```
**Key Points:**
- Separate heading: "Material Uncertainty Related to Going Concern"
- Reference FS note
- State MU may cast significant doubt
- Opinion NOT modified
---
## LINK WITH SA 701 (KEY AUDIT MATTERS)
For **Listed Entities:**
- GC MU is **inherently a KAM**
- But reported in separate **MURGC section** (not in KAM section)
- KAM section may cross-refer to MURGC
---
## DISCLOSURE REQUIREMENTS (FS Notes)
Management must clearly disclose:
1. **Events/Conditions** → Principal factors giving rise to MU
2. **Plans** → Management's response & status (funding, restructuring, support)
3. **Assessment Period** → 12 months from reporting date (+ extension if
applicable)
4. **Material Uncertainty Statement** → If MU exists, state explicitly
Auditor evaluates: Complete? Neutral? Sufficient for users?
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## EMPHASIS OF MATTER vs MURGC
| Aspect | MURGC (SA 570) | EOM (SA 706) |
|--------|---|---|
| **When** | Material GC uncertainty exists | Fundamental non-GC matter properly
disclosed |
| **Opinion** | Unmodified (mandatory separate section) | Unmodified (optional,
draws attention) |
| **Heading** | Fixed: "Material Uncertainty Related to Going Concern" | Flexible
heading |
---
## SPECIAL CASES (Exam-oriented)
1. **Management refuses GC assessment**
- Scope limitation → Qualified opinion / Disclaimer
2. **Supporting documents not available**
- Cannot evaluate feasibility → May escalate to scope limitation
3. **Subsequent event between reporting date & audit report date**
- Consider impact on MU conclusion (e.g., receipt of finance, court ruling)
- May eliminate or confirm MU
4. **Listed entity + MU exists**
- MU = automatic KAM + MURGC section
- Report both (KAM para references MURGC para)
5. **Interim financials showing GC problem**
- Auditor remains alert for deterioration through audit period
- Assess events/conditions date-by-date
---
## IMPACT ON CARO (India)
CARO Clause 3(i): Auditor must report on entity's ability to meet liabilities as
and when they fall due within 12 months.
**SA 570 evidence feeds CARO:**
- Cash-flow analysis → support CARO clause
- If GC doubt found → comment on CARO clause (material uncertainty exists / no
material uncertainty found)
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## QUICK REVISION CHECKLIST
✓ GC = 12-month assumption
✓ Indicators = Financial + Operating + Other
✓ Procedures = DESW (Discuss, Evaluate, Support, Written rep)
✓ MURGC = Unmodified opinion + separate section
✓ Inadequate disclosure = Qualified/Adverse
✓ Wrong basis = Adverse
✓ Scope limitation = Qualified/Disclaimer
✓ Listed entity + MU = KAM + MURGC
✓ CARO 3(i) = linked to GC assessment
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**Last-minute tip:** In exam, always ask: (1) GC basis appropriate? (2) MU exists?
(3) Disclosure adequate? → Answer determines opinion.
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