## SA 570: Going Concern – Responsibilities

### Management's Responsibility

Point	Detail
What	Assess the entity's ability to continue as a going concern
When	Even if the financial reporting framework does NOT explicitly require it
Nature	Involves judgment about inherently uncertain future outcomes

Three factors affecting management's judgment:

1. Uncertainty increases the further into the future the event or condition is projected.

2. Size, complexity, and nature of the entity affect how external factors are weighted.

3. Information is time-bound — judgment is based on information available at assessment time; subsequent events can render earlier judgments incorrect.

---

### Auditor's Responsibility

Responsibility	Detail
(1) Obtain SAAE	Sufficient appropriate audit evidence on management's use of the going concern basis
(2) Conclude	Whether a material uncertainty exists about the entity's ability to continue
(3) These duties exist	Even if the FRF has no explicit going concern requirement
(4) Inherent limitation	The auditor cannot predict future events; absence of going concern comment is NOT a guarantee

> Key principle: The auditor does not guarantee the entity's survival. The auditor only concludes whether the going concern basis of accounting is appropriately used and whether a material uncertainty is properly disclosed.

---

### Management vs Auditor — Side-by-Side

Dimension	Management	Auditor
Primary duty	Make the going concern assessment	Evaluate that assessment
Period covered	Per FRF (minimum 12 months from FS date)	Same period as management; can require extension to 12 months
Obligation if FRF silent	Yes — still must assess	Yes — still must audit
Guarantee provided	No	No

Worked example

### Example 1

Example – Scope of Auditor's Responsibility: An auditor issues an unmodified report on a company's FS without any going concern paragraph. Six months later the company collapses. A shareholder sues the auditor claiming the report was a 'clean bill of health.' The auditor's defence: SA 570 explicitly states that absence of a material-uncertainty paragraph is NOT a guarantee of survival, given the inherent limitations in predicting future events.

### Example 2

Example – Management Assessment Period: Management assesses going concern for only 9 months from the FS date (31 March) i.e., up to December. The auditor must request management to extend the assessment to at least 12 months from 31 March (i.e., to 31 March of the following year) before the auditor can evaluate it.

⚠️ Common exam mistakes

Stating that the auditor guarantees the entity's going concern status — SA 570 explicitly rejects this interpretation.
Believing management only needs to assess going concern when the FRF explicitly requires it — the obligation exists regardless.
Confusing the auditor's role (evaluate management's assessment) with management's role (make the assessment) — the auditor does NOT rectify a deficient management analysis by performing the assessment themselves.
Forgetting that SA 200's inherent limitations apply especially to going concern — future events are harder to detect.

Bare-Act text Q1 – Responsibilities of Management & Auditor · SA 570 – Going Concern · click to expand

The auditor's responsibilities are to obtain sufficient appropriate audit evidence regarding, and conclude on, the appropriateness of management's use of the going concern basis of accounting in the preparation of the financial statements, and to conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern. These responsibilities exist even if the financial reporting framework used in the preparation of the financial statements does not include an explicit requirement for management to make a specific assessment of the entity's ability to continue as a going concern.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Responsibilities of Management and Auditor under SA 570

Worked example

⚠️ Common exam mistakes