JHB 
The issue regarding going concern and business sustainability, especially during difficult economic phases, will always remain a very relevant issue. While auditors do not guarantee sustainability, they do evaluate whether material uncertainty exists about the entity’s ability to continue as a going concern, and they assess broader sustainability and ESG‑related risks where these affect the financial statements.
This is done through the following structured activities and procedures:
Understanding the Business Model
The auditors ask questions like how the company generates value, what are its key products and services, what are the dependencies, demand trends, competition and possible new innovations.
Evaluating Indicators of Going Concern
ISA 570 (Revised) requires auditors to assess going concern for at least 12 months from the date of the financial statements. This is done through various considerations, including amongst others, history of losses, negative cash flows, net liability position, breaches of loan covenants, inability to refinance debt, dependence on a small number of customers and/or suppliers, and other cashflow indicators. Activities that assess future sustainability are also performed, including scrutinization of budgets, forecasts and other management preparations that could assist, testing assumptions thereon, and performing sensitivity analysis thereon.
ESG and Sustainability Risk Assessment
These matters are becoming increasingly important as the world evolves. Exposure to carbon taxes, emissions caps, climate related risks (e.g. floods, storms, etc.) and compliance costs are a few factors to consider.
Social risks
Labour relations, strikes, health and safety, etc. are all considered by the auditor.
Governance risks
Auditors consider the internal control environment of the client, what board oversight is in place, fraud risks, etc.
Assessing Financial Sustainability
Financial sustainability focuses on the company’s ability to generate sufficient cash to meet obligations and invest in future growth. Key considerations include liquidity, solvency, profitability trends, capacity to service future capital expenditure, and what optimistic considerations management has applied in their budgeting and forecasting process.
Operational Sustainability
Operational sustainability looks at whether the business can continue producing goods or services effectively. These include factors such as supply chain stability, dependencies on key personnel, relevance and security of the IT environment and systems at the client, management of inventory, safeguarding of assets, etc. The auditor will assess these and determine whether any of these pose any risk to business sustainability.
Regulatory and Compliance Sustainability
Changes in law can threaten sustainability. The auditor will consider the effect of any new law or regulation on the business and its operations. This should include any consideration for possible provisions, contingencies and any other financial impact the new law or regulation might have on the entity.
Management Competence and Governance Quality
Sustainable businesses require strong governance. Consideration is given to the tone at the top, independence and oversight from the Board, Risk Management and Registers, responsiveness to audit findings, etc.
External Environmental Factors
External threats can undermine sustainability even when internal performance is strong.
These may influence impairment testing, revenue forecasts, going concern, and financial statement disclosures and the auditor would usually consider these as part of the risk assessment process at the planning stage of the audit, and then throughout the audit to the point where it addresses specific line items in the financial statements.
Reporting Implications
The goal is to determine whether material uncertainty exists about the entity’s ability to continue as a going concern and whether the financial statements appropriately reflect sustainability‑related risks.
If material uncertainty exists, the auditor must:
Include a “Material Uncertainty Related to Going Concern” paragraph when uncertainty exists but disclosures are adequate.
Modify the opinion when disclosures are not
Use Emphasis‑of‑Matter paragraphs when drawing attention to important sustainability‑related information (where required).
Louis Meyer CA(SA) M.Com
26 May 2026