Going concern evaluation in an audit
Work from adverse conditions to management plans, corroborating evidence, disclosures, and the correct issuer or nonissuer report model.
The decision that earns the point
Identify the engagement facts and governing framework
The auditor considers identified conditions and events in the aggregate, evaluates management's plans and supporting evidence, assesses disclosures, and applies the report requirements of the stated audit framework. Adverse conditions may indicate substantial doubt, but one condition or unsupported management intent does not settle the conclusion.
Exam use
AUD can test warning conditions, the evaluation period, management plans, evidence, disclosures, governance communication, documentation, and issuer-versus-nonissuer reporting.
Your scratch-paper plan
Solve it in three moves
- 1
Aggregate conditions and events
Treat losses, liquidity pressure, debt maturity, financing, and operating evidence as inputs that may indicate substantial doubt rather than automatic conclusions.
PCAOB AS 2415: Consideration of an Entity's Ability to Continue as a Going Concern - 2
Test management plans
Evaluate feasibility, timing, capacity, and corroborating evidence instead of accepting intent or an uncommitted proposal.
PCAOB AS 2415: Consideration of an Entity's Ability to Continue as a Going Concern - 3
Use the governing report model
Evaluate the applicable disclosures and report consequence under PCAOB AS 2415 for an issuer or AU-C 570 for a nonissuer.
AICPA AU-C 570: The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern
Worked problem
Work the facts before choosing the answer
CPAPass illustration assumptions: this is a PCAOB issuer audit. The issuer has recurring losses and debt due soon. Management supplies only an unsigned financing term sheet with no committed lender and no other mitigating evidence.
CPAPass original exam illustration using stated assumptions
Show the work
The losses and debt maturity are conditions that may indicate substantial doubt when considered together. The uncommitted term sheet does not by itself provide persuasive support that financing will be obtained.
Rule source: PCAOB AS 2415: Consideration of an Entity's Ability to Continue as a Going ConcernAnswer
Perform further procedures, evaluate management's plans and disclosures, document the conclusion, and apply PCAOB AS 2415 reporting only after the aggregate evidence is evaluated.
Rule source: PCAOB AS 2415: Consideration of an Entity's Ability to Continue as a Going ConcernDo it now
Test the same decision with a fresh question
Start with free AUD practice. Create an account only when you want the 5-day no-card CPAPass trial and continued section practice.
The trap and the repair
Common trap
Treating management intent or one favorable document as guaranteed mitigation ignores feasibility and evidential support.
Repair
Tie each plan to a concrete action, timing, capacity, and external or internal evidence before evaluating disclosure and reporting.
Going-concern evidence ladder
Conditions start the analysis; they do not finish it
Move from adverse conditions to management plans, corroboration, disclosures, and the framework-specific report.
| Stage | Question | Output | Authority |
|---|---|---|---|
| Conditions and events | What liquidity, operating, financing, or other evidence may indicate substantial doubt in aggregate? | Population of adverse and contrary evidence | PCAOB AS 2415: Consideration of an Entity's Ability to Continue as a Going Concern |
| Management plans | Are the plans feasible, timely, and supported rather than merely intended? | Evidence-supported mitigating effect | PCAOB AS 2415: Consideration of an Entity's Ability to Continue as a Going Concern |
| Issuer reporting | Are disclosures adequate, and what does PCAOB AS 2415 require? | Issuer report conclusion | PCAOB AS 2415: Consideration of an Entity's Ability to Continue as a Going Concern |
| Nonissuer reporting | What does current AU-C 570 require for the nonissuer facts? | Nonissuer report conclusion | AICPA AU-C 570: The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern |
After a miss
Repair a going-concern miss
- 1
Separate conditions, management plans, corroborating evidence, disclosures, and report consequence into five lines.
- 2
Rework the term-sheet example after adding a signed lender commitment and identify what evidence still needs evaluation.
- 3
Answer a fresh AUD going-concern question and cite the issuer or nonissuer report owner before concluding.
Your exam workflow
- Step 1Read the requirementIdentify what the task asks you to decide about going concern audit cpa exam.
- Step 2Sort the factsTreat losses, liquidity pressure, debt maturity, financing, and operating evidence as inputs that may indicate substantial doubt rather than automatic conclusions.
- Step 3Apply the ruleEvaluate feasibility, timing, capacity, and corroborating evidence instead of accepting intent or an uncommitted proposal.
- Step 4Check the outputEvaluate the applicable disclosures and report consequence under PCAOB AS 2415 for an issuer or AU-C 570 for a nonissuer.
Keep the next step narrow
Quick questions
What is the shortest useful answer for going concern audit cpa exam?
The auditor considers identified conditions and events in the aggregate, evaluates management's plans and supporting evidence, assesses disclosures, and applies the report requirements of the stated audit framework. Adverse conditions may indicate substantial doubt, but one condition or unsupported management intent does not settle the conclusion.
How can going concern audit cpa exam appear on the CPA Exam?
AUD can test warning conditions, the evaluation period, management plans, evidence, disclosures, governance communication, documentation, and issuer-versus-nonissuer reporting. The exact task can change, so identify the governing facts before applying the rule.
What is the most common mistake with going concern audit cpa exam?
Treating management intent or one favorable document as guaranteed mitigation ignores feasibility and evidential support. Tie each plan to a concrete action, timing, capacity, and external or internal evidence before evaluating disclosure and reporting.
Where should I practice going concern audit cpa exam?
After the worked example, use AUD practice for a fresh question that requires the same decision. If the miss depends on audit report conclusions and modifications, review that handoff before trying another set.
How should I review going concern audit cpa exam after a missed question?
Separate conditions, management plans, corroborating evidence, disclosures, and report consequence into five lines. Rework the term-sheet example after adding a signed lender commitment and identify what evidence still needs evaluation. Answer a fresh AUD going-concern question and cite the issuer or nonissuer report owner before concluding.