Going concern: the assessment everyone notices when it matters most

It is more than a year-end disclosure — robust forecasting, stress testing and early planning are essential to ensuring your business can navigate uncertainty and continue trading.

For many businesses, going concern only comes into focus when it becomes uncomfortable. Then it is all anyone reads.

The going concern assessment is a familiar year-end ritual for many. Forecasts are prepared, a paper is drafted, and a conclusion is reached, then everyone moves on. It sits neatly in the background. Sensible. Routine. Box ticked.

Until it becomes the only thing that matters.

We have all seen what happens when going concern changes from mundane to being the headline. The collapse of Carillion in January 2018 is still one of the clearest reminders: a major listed contractor with significant government work and audited accounts that appeared robust, while the underlying reality was far weaker than the narrative suggested. When liquidity pressure hit, confidence evaporated both quickly and publicly. Suddenly, every stakeholder was asking the same question: was this business ever really a going concern?

That is the uncomfortable truth: going concern is rarely tested in calm conditions. It is tested under pressure, when assumptions break, cash tightens, and scrutiny intensifies.

It is not a disclosure. It is a discipline.

Too often, going concern is treated as a disclosure exercise rather than what it is: a disciplined assessment of whether the business can continue to trade for at least the next twelve months. This distinction matters.

A disclosure can be written late. A discipline has to be embedded early.

Strong businesses treat going concern as an extension of how they manage themselves. That means:

• Forecasts that reconcile to actual performance
• Assumptions that are evidence-backed, not optimistic placeholders
• Regular reforecasting throughout the year, not just at year-end
• Clear visibility over cash, not just profit

Less robust approaches tend to look quite different. Forecasts are built quickly, assumptions lean heavily on best-case outcomes, and problems are deferred into the future.

That approach works until it doesn’t.

Twelve months is shorter than you think

The going concern period looks modest on paper. At least twelve months from the date of approval. But the reality is different, it is a demanding window.

It requires businesses to take a view on:

• Revenue resilience
• Cost behaviour under pressure
• Working capital movements
• Debt servicing and covenant compliance
• Access to funding or shareholder support

Each of those elements carries uncertainty. Combined, they introduce real judgement.

A common failure point is overconfidence in steady-state assumptions: revenue continues growing, margins hold, and cash converts predictably.

But real life rarely behaves that cleanly.

• Customers pay later
• Costs prove sticky
• Projects slip or are cancelled
• Financing terms tighten

A good going concern assessment does not ignore those realities. It leans into them.

This is where stress testing separates strong analysis from surface-level compliance. Sensitivity scenarios, downside modelling, and headroom analysis are not ‘nice to have’. They are the difference between insight and illusion. The difference between having a plan for changes to implement if there is a downturn and scrambling around to find solutions when cash is already running out.

A bad forecast doesn’t fail in a spreadsheet. It fails in real life.

Directors own it. Auditors challenge it.

There is an important dynamic at play in every going concern review.

Directors are responsible for the assessment.
Auditors are responsible for challenging it.

That tension is healthy. It is designed to ensure that the conclusion is robust, not convenient.

In practice, the quality of the process often comes down to how early and how openly that dialogue happens.

When finance teams engage early, share assumptions transparently, and demonstrate clear thinking, the process becomes constructive. Challenge improves the output.

When the assessment is rushed, defensive, or poorly evidenced, the process becomes reactive. Pressure increases, timelines tighten, and problems begin.

Going concern rarely becomes difficult because of the accounting. It becomes difficult because of timing, quality of evidence, and clarity of thinking.

When it goes wrong, the impact is still felt

Many audit judgements sit quietly in the detail with little public disclosure. Going concern does not, it’s a prominent disclosure in financial statements that most stakeholders will review.

For this reason, where material uncertainties exist, they need to be explained clearly. If those uncertainties later turn into real financial difficulty, the people closest to the business will look back at what was said, what was assumed, and whether the warning signs were properly understood.

For smaller and medium-sized entities, the consequences may not play out in the press, but they can still be significant for directors, shareholders, lenders, employees, suppliers and customers.

That is why boilerplate disclosures can carry risks. Generic wording doesn’t give stakeholders the detail to understand what the risk to the business is or what the underlying issues are. This can lead to unfounded concern and different decisions than would have otherwise been taken.

A going concern disclosure should be specific, balanced, and rooted in the circumstances of the business. It does not need to overstate the risk but does need to explain it honestly and in context which allows everyone connected to the business to make better decisions.

Why it matters more than ever

In a more volatile economic environment, going concern has moved up the agenda again.

Inflationary pressure, interest rate movements, supply chain disruption, and shifting demand patterns all introduce uncertainty into forecasts. That makes the underlying assessment more judgemental and more important.

It is no longer enough for forecasts to be directionally right. They need to be resilient.

That means asking harder questions:

• What happens if revenue drops by 10%?
• What costs can actually flex and which cannot?
• How much covenant headroom is real, not theoretical?
• How quickly can management respond if conditions change?

These are not audit questions, they are business questions.

Getting it right

The good news is that strong going concern assessments are entirely achievable. They share a few consistent characteristics:

• Start early
  Leave it late and it becomes a compliance exercise. Start early and it becomes a planning tool.
• Build from reality
  Use actual performance trends, not aspirational targets.
• Stress test properly
  Identify where the model breaks, not where it just about holds.
• Document clearly
  A robust conclusion needs a clear trail of evidence and reasoning.
• Engage proactively with auditors
  Early dialogue reduces friction and improves outcomes.

Final thought

Going concern is not the most technical area of the audit but it is the most fundamental.

It asks a simple question. Can this business continue?

Most years, the answer is yes and everyone moves on.

But the years where that answer is less obvious are the ones that matter. And in those moments, the work done months earlier, the quality of the forecast, and the discipline applied throughout the year all come into sharp focus.

Going concern is quiet, until it isn’t. Then it becomes the story.

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