Explaining a going concern uncertainty to a client
How to prepare a client's directors for a Material Uncertainty Related to Going Concern section, and what they might tell their bank or other lenders.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
The directors have agreed the disclosure. The note explains that the company depends on its overdraft being renewed, that renewal is not yet confirmed, and that this casts significant doubt on its ability to continue. Then they see the draft auditor's report, with a section headed "Material Uncertainty Related to Going Concern", and the mood in the room changes. "Are you saying we're finished? What will the bank think?"
How the firm handles that conversation matters for the client relationship and for the client's relationship with its lenders. This article covers what the section means, why it does not modify the opinion, where it sits in the report, how it differs from an emphasis of matter, and how to prepare directors for questions from their bank.
What the section says, and what it does not
ICAEW is direct about the common misreading: a section on a material uncertainty relating to going concern does not mean the company is not a going concern, and it does not modify the audit opinion. It means the directors have concluded there is a material uncertainty, the auditor agrees, and the directors have disclosed it.
ICAEW explains that a company is a going concern if it can remain in business for the foreseeable future, and that its statements are prepared on a going concern basis unless management intends to liquidate it or cease trading, or has no realistic alternative but to do so.
Put together, the message for directors is:
- the statements are still prepared on a going concern basis, and the auditor agrees that basis is appropriate;
- there is an uncertainty significant enough that readers need to know about it;
- the directors have explained it properly in the notes;
- the auditor's report points readers to that explanation.
That is a long way from "the business is failing". It is closer to "the business has been open about a real risk".
Why it does not modify the opinion
ACCA explains that under ISA 570 (Revised), when the going concern basis is appropriate but a material uncertainty exists and management has made adequate disclosures, the auditor expresses an unmodified opinion and includes a separate section headed "Material Uncertainty Related to Going Concern".
The two conditions matter. If the disclosure were inadequate, the position would change, and the opinion could be modified. If the going concern basis were not appropriate at all, the statements themselves would be misstated. The section exists precisely because neither of those is the case. Our guide to the auditor's going concern evaluation covers how the firm reaches those conclusions.
Where it sits, and a version note
ACCA states that under ISA 570 (Revised) the section is placed immediately after the basis for opinion and before the key audit matters section. Its position, near the top of the report, is intended to make sure readers see it.
A version note: ACCA's article describes ISA 570 (Revised) as it arose from the IAASB's 2015 auditor reporting project. The IAASB's ISA 570 (Revised 2024), Going Concern, applies to audits of financial statements for periods beginning on or after December 15, 2026, and ACCA's article does not refer to it. For audits of those periods, check the revised standard's requirements on reporting, including the section's wording and placement.
How it differs from an emphasis of matter
ICAEW explains that emphasis of matter paragraphs do not change the audit opinion and are used to draw users' attention to a matter the auditor considers important to their understanding of the financial statements.
Directors sometimes ask why the uncertainty is not simply an emphasis of matter. The answer is that going concern uncertainties have their own dedicated section under ISA 570 (Revised), with its own heading, rather than being handled through a general emphasis paragraph. Both leave the opinion unmodified; the dedicated section signals that this particular matter has its own reporting rule. Our article on emphasis of matter and other matter paragraphs explains when those are used.
Previewing the report and sharing it with a bank
Directors should never see the section for the first time in the signed report. In Achekam, the partner can send the client a read-and-comment preview link to the audit report before signing. The client opens it without signing in, and the link expires and can be revoked. Sending it early, with a covering note explaining the section, gives the directors time to read, ask questions and prepare what they will say to lenders.
Once the report is issued, directors often need to send the statements to their bank. Achekam lets staff share a vault document with a named person by an e-mailed link that can block downloading, require a code and be revoked, and every view and download is recorded. The link lasts seven days by default, and no account is needed to open it. Where the client asks the firm to send the issued statements to a named contact at the bank, that is a controlled way to do it, on the client's instruction.
Questions directors usually ask
"Does this mean you think we will fail?" No. It means there is a significant uncertainty that the directors have disclosed and the auditor agrees with their assessment. The statements are still prepared on a going concern basis.
"Will the bank call in the loan?" The firm cannot speak for the bank. Lenders read the notes as well as the report, and a clear, honest note with a realistic plan is usually more reassuring than a vague one. Directors should talk to the bank before it receives the statements.
"Can we remove it if the overdraft is renewed before signing?" If the uncertainty is resolved before the report is dated, the assessment changes. The firm will look again at the evidence at that point.
"Will it be there next year?" Only if a material uncertainty still exists then.
"Is our opinion qualified?" No. The opinion is unmodified.
ICAEW's explanation of audit reports sets out what the material uncertainty section means and how it differs from a modified opinion, in terms directors can follow.
When a material uncertainty is likely, raise it with the directors as soon as the going concern assessment points that way, not when the draft report is ready. Early warning turns a difficult meeting into a planned one.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
