The revised CAS 570, Going Concern, issued on June 1, 2025, introduces enhancements to the auditor’s responsibilities in the audit of financial statements relating to going concern and increased transparency in the auditor’s report.
Effective for all audits of financial statements for periods beginning on or after December 15, 2026, one of the key changes with the revised standard is that it now requires auditors to request that management extend their going concern assessment period to cover at least 12 months from the date of approval of the financial statements1.
This joint communication between the staff of the Auditing and Assurance Standards Board (AASB), the Accounting Standards Board (AcSB), and the Public Sector Accounting Board (PSAB) highlights this key change and encourages collaboration between management and auditors to ensure auditors can comply with the updated requirements.
Management’s going concern assessment and the auditor’s evaluation
Management’s assessment of the entity’s ability to continue as a going concern is a key part of the auditor’s evaluation. The auditor determines whether:
- management’s use of the going concern basis of accounting in the preparation of the financial statements is appropriate; and
- a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern2.
The auditor’s evaluation includes designing and performing audit procedures to evaluate the method, significant assumptions, and data used by management in assessing the entity’s ability to continue as a going concern3.
What change has been made to the auditing standard relating to the period to be covered by management’s going concern assessment?
A key change in the revised CAS 570 is the commencement date of the 12-month period of management’s going concern assessment, shifting from the date of the balance sheet to the date of approval of the financial statements. What has not changed is the minimum period to be covered, which remains 12 months.
If management has not already prepared an assessment covering at least 12 months from the date of approval of the financial statements, the auditor is required to request management extend its going concern assessment period under the revised CAS 570.
The “date of approval of the financial statements” is described in this standard as the date on which those with the recognized authority determine that all the statements that comprise the financial statements, including the related notes, have been prepared and have asserted that they have taken responsibility for those financial statements.
Some financial reporting frameworks may use other terms to describe the “date of approval of the financial statements.”4 For example:
- Section 3820, Subsequent Events, in Accounting Standards for Private Enterprises (ASPE) refers to the “date the financial statements are completed” and explains that such date will be a matter of judgment taking into account the entity’s particular circumstances and reporting requirements.
- IAS 10, Events After the Reporting Period, in IFRS® Accounting Standards uses the term “date the financial statements are authorized for issue” and explains that such date will vary depending upon the management structure, statutory requirements, and procedures followed in preparing and finalizing the financial statements.
- Section PS 2400, Subsequent Events, in Public Sector Accounting Standards (PSAS), refers to the “date of the completion of the financial statements” and explains that such date will be a matter of judgment taking into account the particular circumstances and reporting requirements.
The level of detail used in management’s analysis and formality of their processes for extending their going concern assessment may vary between entities.5
- For some entities, management may prepare more detailed and frequent assessments of the entity’s ability to continue as a going concern as part of its ongoing monitoring.
- For other entities, management may use a less formal means and less extensive analysis when extending their assessment of the entity’s ability to continue as a going concern. This may be justified if, for example:
- the entity has a history of profitable operations;
- the entity has no liquidity concerns based on debt repayment schedules and potential sources of replacement financing; and
- the entity’s risk assessment process has not identified events or conditions that may cast significant doubt on its ability to continue as a going concern.
- For some public sector entities6, a less formal and less extensive analysis may also be appropriate when extending the assessment. This may be justified if, for example, the entity relies on ongoing government funding and there is no indication of a change in government policy that would affect such funding.
Why has the auditing standard changed the commencement date of the period of management’s assessment?
The primary public interest benefit – and the key purpose of this change – is to provide users of the financial statements with more current information, including information relevant to management’s assessment of going concern.
Additionally, this change enables greater comparability and consistency globally. Certain jurisdictions (such as Australia, New Zealand, United Kingdom and United States) have already amended their national-equivalent going concern auditing standards to require the commencement date of the 12-month period of management’s assessment to be the date of approval of the financial statements.
How do these changes align with the accounting requirements?
Financial reporting frameworks typically require management to make an explicit assessment of the entity’s ability to continue as a going concern and specify the minimum period for which management is required to consider all information. For example, under both the ASPE7 and IFRS Accounting Standards8, management is required to make an assessment of an entity’s ability to continue as a going concern, taking into account all available information about the future, which is at least, but not limited to, 12 months from the end of the reporting period.
The auditor’s request for management to extend their going concern assessment to cover at least 12 months from the date of approval of the financial statements, rather than from the end of the reporting period, may be a change from current practice. While CAS 570 has changed the auditor’s responsibility for assessing an entity’s ability to continue as a going concern, this change is not inconsistent with:
- ASPE or IFRS Accounting Standards, as these accounting frameworks prescribe a minimum period for management’s assessment, as opposed to a maximum.
- PSAS, as these standards do not specify the time period that a going concern assessment must cover.
What are the implications if management is unwilling to extend its assessment?
Revised CAS 570 addresses when management is unwilling to extend its assessment as requested by the auditor. In such cases, the auditor is required to discuss the matter with management and, when appropriate, those charged with governance and inquire as to the reason for their decision9.
These discussions may provide the auditor with additional information to support the appropriateness of management’s use of the going concern basis of accounting over the extended period.10 For example, a discussion documented by the auditor may provide sufficient evidence to support management’s use of the going concern basis of accounting when a less formal and less detailed analysis is appropriate.
However, after these discussions, the auditor may conclude that they are unable to obtain enough evidence to support the appropriateness of management's use of the going concern basis of accounting over the extended period. If management remains unwilling to extend its assessment, the auditor is required to determine the impact on the audit. This may ultimately have implications for the auditor’s opinion.11
What does this mean for review engagements under CSRE 2400?
The revisions to CAS 570 apply only to audit engagements. There have been no corresponding changes to CSRE 2400, Engagements to Review Historical Financial Statements, that would require the practitioner to request that management extend its going concern assessment period12. Accordingly, practitioners’ expectations regarding the period covered by management’s going concern assessment may differ between audit and review engagements.
How can management and the auditor work together?
Outlined below are opportunities for management and the auditor to work together to help the auditor comply with the revised CAS 570 requirements related to the timeline of management’s going concern assessment.
- Early discussion of approval date. The auditor and management may wish to discuss the expected date of approval of the financial statements at an early stage of the audit.
- Set expectations in the engagement. In the engagement letter, the auditor may include a reference to the expectation that management’s assessment of the entity’s ability to continue as a going concern covers at least 12 months from the date the financial statements are approved.
- Timely inquiry regarding management’s assessment period. The auditor may wish to ask management as soon as practicable about the period covered in management’s assessment and whether there may be issues with extending it if the period covered is less than 12 months from the date of approval of the financial statements.
Other resources
Contact
If you have comments on this publication, please contact us:
David Hirst, CPA
Principal, Auditing and Assurance Standards Board
Email: [email protected]
Andrew White, CPA, CA
Associate Director, Accounting Standards Board
Email: [email protected]
Antonella Risi, CPA, CA
Associate Director, Public Sector Accounting Board
Email: [email protected]
1 CAS 570, paragraph 21
2 CAS 570, paragraph A34
3 CAS 570, paragraph 17
4 CAS 570, paragraph A51
5 CAS 570, paragraph A56
6 CAS 570, paragraph A53
7 Section 1400 General Standards of Financial Statement Presentation, paragraphs 7-8
8 IFRS 18 Presentation and Disclosure in Financial Statements, paragraphs 6K – 6L (for years beginning on or after January 1, 2027); or IAS 1 Presentation of Financial Statements, paragraphs 25 – 26 (for years beginning before January 1, 2027)
9 CAS 570, paragraph 22
10 CAS 570, paragraph A55
11 CAS 570, paragraph A57
12 CSRE 2400, paragraph 52