Going concern · 3 minute read
Going concern preparation should begin before the auditor asks for the model
How finance teams can organise forecasts, assumptions, liquidity evidence and governance review before going-concern work becomes a late audit workstream.
Going concern is a management assessment before it is an audit request. If preparation begins only when the auditor asks for a model, the finance team may be trying to build the forecast, collect financing evidence, explain assumptions and obtain governance approval inside an already compressed reporting timetable.
The starting point is a clear assessment period and an approved base case. The model should connect to the latest available actual results, budgets and cash information, while explaining material differences from plans previously approved. The assessment period must follow the applicable reporting framework and local requirements rather than a generic template.
Assumptions need evidence and ownership. Revenue growth, margin, working capital, refinancing, covenant compliance and mitigating actions should be traceable to operational information or approved decisions. The team should distinguish actions already within management's control from plans that depend on lenders, shareholders, customers or other external parties.
Downside analysis should show what management is trying to understand, not merely reduce every input by the same percentage. Identify the events or conditions that could affect liquidity, model credible combinations and show headroom over time. Where a covenant or facility is critical, the calculation, testing date, terms and evidence of availability should be visible.
Internal review should cover both the mechanics and the story. Reviewers need to challenge formula integrity, forecast consistency, significant assumptions, contradictory evidence and the feasibility of mitigating actions. The conclusion and financial-statement disclosures should remain connected to the model rather than being drafted as a separate exercise.
Early auditor discussion is valuable where the assessment period, methodology, evidence or events are uncertain. It does not transfer management's responsibility or guarantee agreement, but it can identify expectations before governance dates are at risk. The goal is a controlled workstream with an owner, evidence plan, review window and visible open questions.
What to do next
- Confirm the applicable assessment period and timetable early.
- Connect the base case to approved forecasts and the latest actual information.
- Assign evidence and owners to material assumptions and mitigating actions.
- Model credible downside scenarios and show liquidity or covenant headroom over time.
- Reserve management, technical, auditor and governance review windows where relevant.
- Track unresolved methodology or evidence questions before they affect reporting dates.