What is going concern in an audit and what happens if there is doubt?
Going concern means the company can keep operating for the foreseeable future. Management assesses it and the auditor tests that assessment, covering at least twelve months from the date of the financial statements. Doubt must be disclosed, and the auditor's report may draw attention to it or be modified.
What it covers The financial statements assume the company will continue in business unless the directors intend to liquidate or cease trading, or have no realistic alternative. HKSA 570 (Revised) sets what the auditor does.
What the auditor does
- Asks management to assess going concern and evaluates that assessment.
- If management's assessment covers less than twelve months from the date of the financial statements, the auditor asks them to extend it to at least twelve months.
- Looks for signs of doubt such as losses, net current liabilities, loan defaults, loss of key customers or reliance on shareholder funding.
Possible reports
- Adequate disclosure of a material uncertainty: the opinion is unmodified, with a separate going-concern section.
- Inadequate disclosure: a qualified or adverse opinion.
- In extremely rare cases with multiple significant uncertainties: a disclaimer.
What owners can do
- Prepare a cash flow forecast.
- Get written confirmation of shareholder or bank support, where that support is real.
- Record plans (cost cuts, funding) in board minutes.
A going-concern paragraph is not an automatic loan refusal, but lenders will notice it.
Legal basis
- HKSA 570 (Revised) Going Concern
- HKSA 705
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- Does every Hong Kong limited company need an audit?Yes. Every Hong Kong company must have an auditor for each financial year and its financial statements audited, whatever its size or whether it trades. The only company that escapes is a qualifying private company that has validly become dormant under s.5 and s.447 of the Companies Ordinance.
- Do I still need an audit if my company had no revenue or no business activity?Yes, unless the company has formally become dormant. Having no sales does not make a company dormant in law. If it had any expenses, bank charges or other recorded transactions, the audit duty continues for that year.
- My company is loss-making. Do I still need to audit it?Yes. Profit or loss has no bearing on the audit requirement. A loss-making company is audited every year, and the auditor will also look closely at going concern.
- What does a statutory audit involve, step by step?The auditor accepts the engagement, plans around risks, tests balances and transactions with evidence, obtains third-party confirmations, reviews events after year-end, agrees adjustments, obtains a management representation letter and issues a signed report. The directors approve the accounts.
- What are the directors' responsibilities for the accounts, and the auditor's?Directors prepare, approve and sign the financial statements and directors' report and must keep proper accounting records. The auditor forms and reports an independent opinion. Audit does not shift the directors' responsibility to the auditor.