Frequently Asked Questions
August 2022
Reporting Going Concern Matters in the Auditor’s Report
This publication has been developed by the Going Concern Task Force of the International Auditing and
Assurance Standards Board (IAASB) to address some of the common questions in relation to the use of
and the interrelationship of Material Uncertainty Related to Going Concern and Key Audit Matters
sections, and Emphasis of Matter paragraphs, in the auditor’s report prepared in accordance with
International Standards on Auditing (ISAs).
This publication does not amend or override the International Standards on Auditing (ISAs), the texts of
which alone are authoritative. The frequently asked questions are not meant to be exhaustive 1 and
reading this publication is not a substitute for reading the ISAs.
ABBREVIATED TERMS FREQUENTLY USED IN THIS PUBLICATION:
MURGC – Material Uncertainty
KAM – Key Audit Matters EOM – Emphasis of Matter
Related to Going Concern
What is the purpose of MURGC and KAM sections and EOM paragraphs in the
Question 1
auditor’s report?
The table below provides an overview of the purpose of Material Uncertainty Related to Going Concern
(MURGC) and Key Audit Matters (KAM) sections and Emphasis of Matter (EOM) paragraphs:
Heading Purpose
Material ► Applies if the auditor has concluded that a material uncertainty related to
Uncertainty going concern exists, and for which adequate disclosure has been made in
Related to Going the financial statements. The use of a separate section that includes
Concern 2 reference to the fact that a material uncertainty exists that may cast
significant doubt on the entity’s ability to continue as a going concern is
intended to give additional prominence to this information and alert users to
this circumstance.
Key Audit Matters 3 ► Provides information to intended users to assist them in understanding
those matters that, in the auditor’s professional judgment, were of most
significance in the audit of the financial statements of the current period,
including how such matters were addressed in the audit.
1
While certain ISA requirements and application and other explanatory material are highlighted, this publication does not cover all
of the ISA provisions that are relevant to the auditor’s responsibility to report in accordance with the ISAs.
2
See ISA 570 (Revised), Going Concern
3
See ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report
1
FREQUENTLY ASKED QUESTIONS―REPORTING GOING CONCERN MATTERS IN THE AUDITOR’S REPORT
Heading Purpose
Emphasis of ► Establishes a mechanism for auditors to provide additional communication
Matter 4 in the auditor’s report, to draw users’ attention to a matter(s) presented or
disclosed in the financial statements that, in the auditor’s judgment, is of
such importance that it is fundamental to users’ understanding of the
financial statements.
Question 2 Do MURGC, KAM and EOM apply to all audits?
The applicability of ISA 570 (Revised), ISA 701 and ISA 706 (Revised) is described in the scope section of
those standards.
The Material Uncertainty Related to Going Concern (MURGC) section and Emphasis of Matter (EOM)
paragraphs, and their respective related requirements, apply to all audits, subject to certain conditions being
present (see Question 1).
Communicating Key Audit Matters (KAM) is required for listed entities. 5 In addition, ISA 701:
► Does not preclude communicating KAM when required by law or regulation or the auditor otherwise
decides to do so.
► Prohibits the auditor from communicating KAM when the auditor disclaims an opinion on the financial
statements, unless such reporting is required by law or regulation. 6
What are the implications for the auditor’s opinion and the auditor’s report of
Question 3
MURGC, KAM and EOM?
MURGC and KAM sections, and EOM paragraphs, included in the auditor’s
report do not modify the auditor’s opinion, nor do they represent separate
audit opinions on the matters described in those sections or paragraphs.
The table below shows the implications for the auditor’s report when Material Uncertainty Related to Going
Concern (MURGC), Key Audit Matters (KAM) and Emphasis of Matter (EOM) are included:
Heading Implication for the Auditor’s Report ISA Ref.
If adequate disclosure of a MURGC is made in the
Material Uncertainty ISA 570
financial statements, 7 this section of the auditor’s report:
Related to Going (Revised),
4
See ISA 706 (Revised), Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report
5
ISA 701, paragraph 5
6
ISA 705 (Revised), Modifications to the Opinion in the Independent Auditor’s Report, paragraph 29
7
If adequate disclosure of a MURGC is not made in the financial statements, then the auditor’s report does not include a MURGC
section. In those cases, paragraph 23 of ISA 570 (Revised) applies and the auditor expresses a qualified or adverse opinion in
accordance with ISA 705 (Revised). In the Basis for Qualified/Adverse Opinion section of the auditor’s report, the auditor states
that a MURGC exists and that the financial statements do not adequately disclose this matter.
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FREQUENTLY ASKED QUESTIONS―REPORTING GOING CONCERN MATTERS IN THE AUDITOR’S REPORT
Heading Implication for the Auditor’s Report ISA Ref.
Concern ► Draws attention to the note in the financial statements paragraph 22
disclosing the MURGC.
► States that events or conditions indicate that a
material uncertainty exists that may cast significant
doubt on the entity’s ability to continue as a going
concern.
► States that the auditor’s opinion is not modified in
respect of the matter.
This section of the auditor’s report:
Key Audit Matters ISA 701,
► States that KAM are those matters that, in the auditor’s paragraphs 11
professional judgment, were of most significance in and 13
the audit of the financial statements (of the current
period).
► States that the matters were addressed in the context
of the audit as a whole, and in forming the auditor’s
opinion, and the auditor does not provide a separate
opinion on these matters.
► Includes a separate description of each matter and a
reference to the related disclosure(s), if any, in the
financial statements.
► Includes a description of why each matter was
considered to be of most significance in the audit and
how the matter was addressed in the audit.
These paragraphs of the auditor’s report:
Emphasis of Matter ISA 706
► Include a reference to where the relevant disclosures (Revised),
that fully describe the matter can be found in the paragraph 9
financial statements.
► Indicate that the auditor’s opinion is not modified in
respect of the matter being emphasized.
Question 4 What is the interrelationship between MURGC, KAM and EOM?
ISA 700 (Revised), Forming an Opinion and Reporting on Financial Statements, requires that going concern
matters are reported in accordance with ISA 570 (Revised). With the exception of the Opinion and Basis
for Opinion sections, ISA 700 (Revised), does not establish requirements for ordering the elements of the
auditor’s report. However, it does require the use of specific headings for the various sections of the
auditor’s report to assist making auditor’s reports that refer to audits conducted in accordance with ISAs
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FREQUENTLY ASKED QUESTIONS―REPORTING GOING CONCERN MATTERS IN THE AUDITOR’S REPORT
more recognizable. 8
The standards explain that a Material Uncertainty Related to Going Concern (MURGC) is by its nature a
key audit matter. 9 However, when a MURGC exists and adequate disclosure is made in the financial
statements, such a matter is reported in accordance with ISA 570 (Revised). Paragraph 22 of ISA 570
(Revised) establishes the minimum information required to be presented in the auditor’s report in relation
to a MURGC. In particular, the auditor is required to include:
► A MURGC section that includes the
required content described in Question 3. The appendix to ISA 570 (Revised) provides
► A reference in the Key Audit Matters (KAM) illustrative examples of auditor’s reports relating to
section (when applicable) to the MURGC going concern.
section of the auditor’s report, illustrated as
Illustration 1 includes an unmodified opinion when a
follows: 10 “In addition to the matter
MURGC exists for a listed entity, the disclosure in
described in the Material Uncertainty
the financial statements is adequate, and KAM have
Related to Going Concern section, we have
been communicated in accordance with ISA 701.
determined the matters described below to
be the key audit matters to be
communicated in our report.”
However, the auditor is not precluded from providing additional information to supplement the required
content of the MURGC section. 11 For example, the auditor may explain:
► That the existence of a material uncertainty related to going concern is fundamental to users’
understanding of the financial statements; or
► How the matter was addressed in the audit.
Communicating KAM 12 or providing Emphasis of Matter (EOM) paragraphs 13 is not a substitute for
reporting in accordance with ISA 570 (Revised) when a MURGC exists.
When no MURGC exists, can going concern matters be communicated as a key
Question 5
audit matter in the auditor’s report?
When ISA 701 applies, matters related to going concern may be determined to be a key audit matter. 14
When the auditor concludes in accordance with ISA 570 (Revised) that no material uncertainty exists
relating to events or conditions that may cast significant doubt on the entity’s ability to continue as a going
concern, the auditor may nevertheless determine that one or more matters relating to this conclusion arising
from the auditor’s work effort under ISA 570 (Revised) are Key Audit Matters (KAM). For example, this
may include so-called “close call” situations as contemplated in paragraph 20 of ISA 570 (Revised).
8
ISA 700 (Revised), paragraph A19
9
ISA 570 (Revised), paragraph A1 and ISA 701, paragraph 15
10
ISA 701, paragraphs A6 and A58
11
ISA 570 (Revised), paragraph A30
12
ISA 701, paragraph 4
13
ISA 706 (Revised), paragraph A7
14
ISA 570 (Revised), paragraph A1
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FREQUENTLY ASKED QUESTIONS―REPORTING GOING CONCERN MATTERS IN THE AUDITOR’S REPORT
Paragraph A41 of ISA 701 provides application
material to assist the auditor when describing the Situations when events or conditions were
KAM, in particular when the auditor is drawing identified that may cast significant doubt on the
attention to key aspects of related disclosures in the entity's ability to continue as a going concern but,
financial statements. For example, KAM could after considering management's plans to deal
include aspects of the identified events or conditions with these events or conditions, management
disclosed in the financial statements, such as and the auditor conclude that no material
substantial operating losses, available borrowing uncertainty exists are often referred to as “close
facilities and possible debt refinancing, or non- call” situations.
compliance with loan agreements, and related
mitigating factors.
When no MURGC exists, can going concern matters be reported as an EOM in the
Question 6
auditor’s report?
An Emphasis of Matter (EOM) paragraph can be
provided for “close call” situations (see Question 5) Widespread use of EOM paragraphs in the
when the auditor has determined that the matter is auditor’s report may diminish the effectiveness of
not a key audit matter or when ISA 701 does not the auditor’s communication about such matters.
apply. In these circumstances if, based on the
15 (see ISA 706 (Revised), paragraph A6).
auditor’s judgement, the disclosures of
management’s judgments relating to the events or conditions that may cast significant doubt on the entity's
ability to continue as a going concern are fundamental to the users’ understanding of the financial
statements, then the auditor may include an EOM paragraph in the auditor’s report in order to draw attention
to the relevant disclosures in the financial statements.
An EOM paragraph in the auditor’s report may also be provided when the going concern basis of accounting
is not appropriate and management prepares the financial statements on another basis (e.g., a liquidation
basis), and:
► The auditor determines that the other basis of accounting is acceptable in the circumstances; and
► There is adequate disclosure about the basis of accounting on which the financial statements are
prepared.
In these circumstances it may be considered appropriate to include an EOM paragraph in the auditor’s
report to draw the users’ attention to the alternative basis of accounting and the reasons for its use. 16
15
Paragraphs A1–A3 of ISA 706 (Revised) and paragraph A8 of ISA 701, provide application and other explanatory material that
addresses the relationship between EOM paragraphs and KAM in the auditor’s report.
16
ISA 570 (Revised), paragraph A27
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FREQUENTLY ASKED QUESTIONS―REPORTING GOING CONCERN MATTERS IN THE AUDITOR’S REPORT
Example – Auditor Reporting on “Close Call” Situations
This decision-tree may assist the auditor in determining the relevant ISAs that are applicable when the
auditor is reporting on “close call” situations. For the purpose of this example, it is assumed that:
► Events or conditions were identified that may
cast significant doubt on the entity's ability to In 2014, the International Accounting
continue as a going concern but, after Standards Board Interpretations Committee
considering management's plans to deal with issued an Agenda Decision clarifying the
these events or conditions, management and requirements in IAS 1, Presentation of Financial
the auditor conclude that no material Statements, relating to “close call” situations. In
uncertainty exists. addition, in January 2021, the IFRS Foundation
► The financial statements are prepared by issued educational material that addresses
management in accordance with the management Going Concern Disclosures which
International Financial Reporting Standards also provides guidance relevant for “close call”
(IFRS). situations.
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FREQUENTLY ASKED QUESTIONS―REPORTING GOING CONCERN MATTERS IN THE AUDITOR’S REPORT
IAASB’s OTHER RELEVANT RESOURCES
The IAASB has developed other implementation support and non-
authoritative materials (links below) that are relevant for MURGC and
KAM sections, and EOM paragraphs, in the auditor’s report:
► Auditor Reporting on Going Concern
► Going Concern in the Current Evolving Environment – Audit
Considerations for the Impact of COVID-19
► Auditor Reporting in the Current Evolving Environment Due to COVID-19
Visit the IAASB website for more implementation support and other non-authoritative
materials relevant to auditor reporting.
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