Audit issues and trends to consider:

1. Going concern

South Africa’s persistent economic challenges, including load shedding, high unemployment, inflationary pressures, political uncertainty, and constrained fiscal and monetary policy flexibility have created a complex operating environment for South African businesses.

Economic instability magnifies going-concern risks such as liquidity shortages, covenant breaches, reduced access to new capital, and declining consumer demand. Management may rely on over-optimistic forecasts or unsecured funding plans to mitigate these risks, necessitating thorough audit scrutiny.

From an audit perspective, these conditions heighten the risk of material uncertainties, which may cast significant doubt on an entity’s ability to continue as a going concern. In this climate, auditors must remain vigilant in upholding the integrity of financial reporting and stakeholder confidence, ensuring that audit opinions reflect the realities of South Africa’s economic landscape.

The IRBA 2024 Public Inspections Report on Audit Quality (Issued April 2025) has also highlighted audit deficiencies relating to going-concern audit procedures, including:

• No or insufficient assessment of going concern, despite indicators of going-concern uncertainty
• No and/or insufficient audit of management’s judgments and estimates in assessing the going concern, including cash flow models and budgets used, growth rates, profit predictions and management plans.

Auditors must intensify professional scepticism and rigorously evaluate whether organisations can maintain operational viability over the next 12 months, as required by International Standard on Auditing (ISA) 570 (Going Concern), and not accept information provided by management at face value.

Auditors should prioritise assessing the adequacy of cash-flow projections, the feasibility of asset disposals or restructuring plans, and the availability of third-party support, while ensuring transparent disclosure of going-concern uncertainties in financial statements. Additionally, sector-specific vulnerabilities require tailored risk assessments.

Auditors further need to consider possible breaches of the South African Companies Act (Act 71 of 2008), as several clauses are directly, or indirectly impacted by an entity’s going-concern status, including:

• Section 22: Reckless trading prohibited
• Section 30: Annual financial statements
• Section 44: Financial assistance for subscription of securities
• Section 45: Financial assistance
• Section 76: Standards of directors’ conduct
• Section 129: Company resolution to begin business rescue proceedings
• Section 214: False statements, reckless conduct and non-compliance

It is important to take note that the IAASB released the ISA 570 (Revised 2024) standard in April 2025, effective for audits of financial statement for periods beginning on or after 15 December 2026, which further expands going-concern considerations.