Going Concern Assessment: Enhanced Audit Requirements for 2025
Analysis of enhanced going concern assessment requirements for auditors and finance directors, including disclosure obligations and management assessment processes.
Going concern assessments have taken on increased significance in 2025, with enhanced regulatory requirements and heightened stakeholder scrutiny following recent corporate failures. Finance directors must ensure robust going concern assessments are conducted and appropriately disclosed in financial statements.
Management Assessment Requirements
Management is required to assess the entity's ability to continue as a going concern for at least 12 months from the reporting date. Finance directors must conduct comprehensive assessments considering all available information, including cash flow forecasts, financing arrangements, and operational plans.
The assessment should consider both quantitative and qualitative factors, including liquidity position, covenant compliance, market conditions, and management plans. Finance directors should document their assessment process and conclusions clearly to support audit review.
Auditor Responsibilities
Auditors are required to evaluate management's going concern assessment and obtain sufficient appropriate audit evidence to support their conclusion. Finance directors should expect auditors to challenge assumptions, test forecasts, and evaluate the adequacy of management's assessment process.
Disclosure Requirements
Enhanced disclosure requirements require finance directors to provide more detailed information about going concern assessments, including key assumptions, sensitivities, and mitigating actions. These disclosures must be clear, balanced, and provide stakeholders with sufficient information to understand the entity's position.
Conclusion
Effective going concern assessment in 2025 requires robust processes, comprehensive analysis, and clear disclosure. Finance directors who invest in thorough going concern assessments will maintain stakeholder confidence and ensure compliance with enhanced regulatory requirements.