SA 570 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
SA 570 deals with whether an entity can keep operating for the foreseeable future, which is the assumption behind most financial statements. This first part covers what the auditor does about management's assessment, the warning signs, the period assessed, the extra procedures when doubt arises, and the conclusions the auditor reaches.
SA 570 (Revised), as effective for audits of financial statements for periods beginning on or after 1 April 2017, applies to every audit. ICAI may revise standards, so check icai.org for the current text. Cash flow forecasts and loan maturity schedules, which virtual CFO services can help prepare, are central to this work. The reporting consequences are in SA 570 part 2.
The auditor obtains evidence on whether management's use of the going concern basis is appropriate and concludes whether a material uncertainty exists. The auditor considers whether warning events or conditions exist, evaluates management's assessment over the same period management used and at least twelve months from the balance sheet date, asks about events beyond that period, and, if doubt arises, performs additional procedures including evaluating plans and cash flow forecasts. The auditor does not predict the future, and a report without a going concern reference is not an assurance that the entity will continue.
What the standard covers (paragraphs 1-9)
Under the going concern basis, statements are prepared on the assumption that the entity will continue its operations for the foreseeable future, unless management intends to liquidate or cease operations or has no realistic alternative (paragraph 2). Assets and liabilities are then recorded on the basis that the entity can realise its assets and discharge liabilities in the normal course of business.
Management is responsible for assessing the ability to continue. Some frameworks require a specific assessment with disclosures; where none does, the assessment is still needed because going concern is a fundamental principle (paragraphs 3-4). The assessment is a judgement about uncertain future outcomes: uncertainty grows the further ahead one looks, size and complexity matter, and later events may differ from reasonable judgements (paragraph 5).
The auditor's responsibilities are to obtain sufficient appropriate evidence on, and conclude on, the appropriateness of the going concern basis, and to conclude whether a material uncertainty exists (paragraph 6). The auditor cannot predict the future, so the absence of any reference to a material uncertainty in the report cannot be taken as an assurance that the entity will continue (paragraph 7). The three objectives are the two conclusions above and reporting under the standard (paragraph 9).
Risk assessment procedures (paragraphs 10-11)
When performing risk assessment under SA 315, the auditor considers whether events or conditions exist that may cast significant doubt on the entity's ability to continue, and finds out whether management has made a preliminary assessment (paragraph 10).
| Management's position | What the auditor does |
|---|---|
| Preliminary assessment done | Discuss it, see whether management has identified events or conditions that may cast doubt, and what its plans are (10(a)) |
| Not yet done | Discuss the basis for intending to use the going concern basis, and ask whether any such events or conditions exist (10(b)) |
The auditor remains alert throughout the audit for evidence of such events (paragraph 11). If they come to light after the risk assessment, the assessment and planned procedures may need to be revised (A7).
Examples of events and conditions (A3)
The list is not complete, and one item does not always mean a material uncertainty exists. In the auditor's own summary:
| Area | Examples |
|---|---|
| Financial | Net liabilities or net current liabilities; fixed-term borrowings near maturity with no realistic prospect of renewal; heavy reliance on short-term borrowing for long-term assets; signs that creditors are withdrawing support; negative operating cash flows; poor key ratios; substantial operating losses; arrears or stopping of dividends; inability to pay creditors on time or to comply with loan terms; suppliers moving to cash-on-delivery; inability to finance essential investments |
| Operating | Management intending to liquidate or cease operations; loss of key management; loss of a major market, key customer, licence or principal supplier; labour difficulties; shortage of supplies; a strong new competitor |
| Other | Non-compliance with capital or other statutory requirements; pending legal or regulatory proceedings that could lead to claims the entity cannot meet; adverse changes in law or policy; uninsured or underinsured catastrophes |
Such factors can often be offset. For example, a failure to make normal debt repayments may be balanced by plans to dispose of assets, reschedule repayments or raise capital, and the loss of a principal supplier by an alternative source (A3). For small entities, the risk that lenders stop supporting the business, or the loss of a main supplier, customer, key employee or licence, is of particular relevance (A5-A6).
Evaluating management's assessment (paragraphs 12-14)
The auditor evaluates management's assessment (paragraph 12). This is a key part of considering the going concern basis (A8). It is not the auditor's job to fix a lack of analysis by management, though a short assessment may be enough where there is a history of profitable operations and ready access to finance (A9). Otherwise, the auditor may evaluate the process, the assumptions and the feasibility of plans (A10).
The period. The auditor covers the same period as management used under the framework, or longer if law specifies. If management's assessment covers less than twelve months from the date of the financial statements, the auditor requests management to extend it to at least twelve months from that date (paragraph 13). In smaller entities, where management relies on in-depth knowledge rather than detailed analysis, the request can be met by discussion, inquiry and inspection of supporting documents such as orders received (A12). Continued support from owner-managers is often critical in small entities, for example subordinating a loan or giving a personal guarantee; the auditor may seek documents and written confirmation of the terms and intention (A13).
The auditor also considers whether management's assessment includes all relevant information the auditor knows from the audit (paragraph 14).
Beyond the assessment period (paragraph 15)
The auditor inquires about events or conditions beyond management's period that may cast doubt. Apart from inquiry, there is no responsibility to perform other procedures to find such events (A15). The further ahead the event, the more significant the indications must be before further action is needed (A14).
When events or conditions are identified (paragraph 16)
The auditor performs additional procedures, including considering mitigating factors, to decide whether a material uncertainty exists:
| Required step | Paragraph |
|---|---|
| Ask management to make an assessment if none exists | 16(a) |
| Evaluate management's plans: will they improve the position, and are they feasible | 16(b) |
| Where a cash flow forecast matters, evaluate the reliability of the data and the support for assumptions | 16(c) |
| Consider facts that have emerged since management's assessment | 16(d) |
| Request written representations on plans and their feasibility | 16(e) |
A16 lists further procedures: discussing forecasts and interim statements, reading loan and debenture terms for breaches, reading minutes for financing difficulties, inquiring of legal counsel, confirming support arrangements and borrowing facilities, and subsequent events procedures (see SA 560). Plans may include selling assets, restructuring debt, delaying spending or raising capital (A17), and third-party support may need written confirmation (A19).
Conclusions (paragraphs 17-20)
The auditor evaluates whether sufficient appropriate evidence has been obtained and concludes on the appropriateness of the going concern basis (paragraph 17). The auditor then concludes whether a material uncertainty exists. It exists when the size of the potential impact and the likelihood are such that disclosure of the nature and implications is necessary for fair presentation, or for statements not to be misleading under a compliance framework (paragraph 18).
If the basis is appropriate but a material uncertainty exists, the auditor determines whether the statements adequately disclose the principal events and management's plans, and say clearly that there is a material uncertainty and that the entity may be unable to realise assets and discharge liabilities normally (paragraph 19). If events were identified but no material uncertainty exists, the auditor evaluates whether the framework's disclosures are adequate (paragraph 20). Part 2 covers how this affects the report.
Illustrative example
Pinnacle Auto Components Pvt Ltd is an invented company; all figures are illustrative. Its year-end is 31 March. Management's assessment covers nine months. The auditor asks management to extend it to twelve months. The auditor also notes that a Rs 15 crore term loan matures in October with no renewal in place, the company has made losses for two years and its main customer has cut orders. The auditor reads the loan terms, discusses the cash flow forecast, tests the data behind it, confirms a sanctioned top-up facility with the bank and reads minutes for any financing difficulty. The plan to sell surplus land is checked for documentary support. The auditor concludes a material uncertainty does not exist but the principal conditions need disclosure.
Need help preparing a going concern assessment?
A clear forecast, a view on loan maturities and a record of management's plans save time with the auditor. TaxClue's virtual CFO services can help your finance team build cash flow forecasts and maturity schedules that support management's assessment. For a plain explanation of the concept, see what going concern means.
Key takeaways
- Management assesses going concern; the auditor evaluates the assessment and concludes.
- The assessment must cover at least twelve months from the balance sheet date.
- Warning events are financial, operating or other; one item does not always mean doubt.
- Extra procedures are needed once doubt arises, including testing forecasts and plans.
- A report without a going concern reference is not an assurance of survival.
Read next
- SA 570 part 2: material uncertainty and reporting
- SA 560: subsequent events
- SA 520: analytical procedures
- What is going concern
Disclaimer: Based on the Standards on Auditing and quality standards issued by the Institute of Chartered Accountants of India, in the versions named in the article, and ICAI's announcement of 31 March 2026 on SQM 1 and SQM 2, as consulted on 3 October 2026. ICAI revises standards from time to time; check the current text and effective dates on icai.org. This article is general information, not legal advice; check the official text before acting.