Going Concern in an Uncertain Economy: What Ghanaian Auditors Should Really Be Looking For

Auditors should treat going concern in an uncertain economy as a high-risk assessment area rather than a routine year-end formality, and in Ghana today, that shift in mindset matters more than ever. Persistent inflation, sharp exchange-rate movements and tighter access to financing have combined to place real pressure on the cash flows of many Ghanaian businesses. For auditors, audit managers, finance directors and controllers, the central question is no longer whether the going-concern basis usually holds, but whether it can withstand realistic downside scenarios over the assessment period. This article sets out practical, standards-anchored guidance for assessing going concern in Ghana’s current economic environment, combining the requirements of ISA 570 with local regulatory context, macroeconomic stress parameters and an evidence-based checklist.

Introduction: why going concern matters now in Ghana?

When the economy is stable, going-concern conclusions tend to be straightforward. In an uncertain economy should auditors accept the same level of comfort? The answer is firmly no. Ghana’s recent macroeconomic strain means that companies which appeared robust a year ago may now be exposed to margin compression, currency mismatches and refinancing gaps that only surface under proper scrutiny.

The auditor’s priorities in this climate are clear: obtain and challenge management’s forecasts, quantify foreign-currency and refinancing exposures, stress-test cash flows under credible downside assumptions, and ensure that any material uncertainty is disclosed adequately. Where these steps are skipped, the risk of an inappropriate audit opinion rises sharply. The sections that follow translate these priorities into concrete procedures grounded in ISA 570 (Revised) and the Ghanaian regulatory landscape.

1. Economic and sector context auditors must consider

A going-concern assessment cannot be performed in a vacuum. The starting point is a clear picture of the macroeconomic environment in which the audited entity operates, because those conditions feed directly into the reasonableness of management’s assumptions about revenue, costs and financing.

Macro indicators to check

Auditors should build a short macro dossier at planning stage, refreshed close to the reporting date. Key indicators to gather from primary sources include:

• Inflation and the Consumer Price Index. Track the latest CPI figures published by the Ghana Statistical Service to test whether management’s cost-growth assumptions are realistic.
• Exchange-rate movements and policy rate. Review currency trends and monetary-policy signals from the Bank of Ghana, which affect both import costs and foreign-currency debt servicing.
• Growth and fiscal outlook. Use the IMF Ghana country reports and the World Bank Ghana overview to frame credible base-case and downside macro scenarios.

These external reference points allow the auditor to challenge over-optimistic management projections with objective, verifiable data, supported by appropriate professional scepticism.

Sectoral vulnerabilities

Not all entities are exposed equally, and the going-concern lens should be sharpened by sector. Import-dependent manufacturers face rising input costs when the cedi depreciates and may struggle to pass these on. Exporters may benefit from currency movements but carry counterparty and settlement risk. Small and medium enterprises frequently have thin liquidity buffers and limited access to affordable credit, making them acutely sensitive to interest-rate and refinancing shocks. Retailers and service businesses reliant on discretionary spending are vulnerable when inflation erodes household purchasing power. Mapping the entity to its sector’s specific pressures helps the audit team target evidence gathering where the going-concern risk is greatest.

2. Audit framework: ISA 570 and the Ghana regulatory context

The going concern in uncertain economy should be evaluated through a defined professional framework, not intuition. That framework is set primarily by ISA 570, supplemented by local professional guidance and company-law considerations.

ISA 570, key auditor responsibilities

Under ISA 570 (Revised), the auditor’s core responsibilities are to obtain sufficient appropriate evidence about the appropriateness of management’s use of the going-concern basis of accounting, to conclude whether a material uncertainty exists related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern, and to report accordingly. This includes evaluating management’s assessment, considering the period covered by that assessment, remaining alert throughout the audit for relevant events and conditions, and considering the adequacy of related disclosures. In short, the standard demands active challenge, not passive acceptance of a management representation.

Relevant Ghana regulatory instruments

Ghanaian auditors operate within an additional layer of local requirements. The Institute of Chartered Accountants, Ghana (ICAG) is the body established under statute to regulate the accountancy profession in Ghana and adopts International Standards on Auditing for use by its members. Company-law obligations under the Companies Act, 2019 (Act 992), including directors’ duties in relation to financial statements and the requirement to prepare accounts on a going-concern basis where appropriate, inform how the going-concern basis is applied at the entity level. Prudential and monetary-policy pronouncements from the Bank of Ghana can materially affect the availability and cost of refinancing, particularly for entities in or dependent upon the banking sector.

Auditors should confirm they are working with current ICAG and IAASB guidance and factor Bank of Ghana policy signals into their assessment of financing availability.

3. Key evidence, red flags and tests auditors should perform

This is where the going-concern assessment is won or lost. The evidence-gathering phase must be rigorous, corroborative and targeted at the specific vulnerabilities identified during planning.

Financial indicators and ratios

Financial red flags are frequently the earliest signals of going-concern stress. Auditors should compute and interpret:

• Cash burn rate and defensive interval. How many months of operations can the entity fund from available cash and committed facilities?
• Current ratio and working-capital position. A persistent working-capital deficit is a significant warning sign.
• Recurring operating losses. Sustained losses erode the equity buffer and the entity’s ability to absorb shocks.
• Debt-service coverage. Can operating cash flows cover scheduled interest and principal, particularly on foreign-currency borrowings?

Non-financial red flags

Financial metrics do not tell the whole story. Non-financial indicators often precede the numbers and should be actively probed:

• Management or key-personnel turnover without adequate succession, which may signal deeper problems.
• Changes in supplier terms, a shift from credit to cash-on-delivery is a strong distress signal.
• Loss of major customers or key contracts that underpin forecast revenue.
• Legal, regulatory or licensing issues that could interrupt operations.

Confirmations and subsequent events

Corroboration is essential. Bank confirmations should be obtained to verify balances and available facilities; direct confirmations from lenders help establish covenant status and any waivers or forbearance. Subsequent-events review is particularly important in an uncertain economy, auditors should examine post-year-end receipts, new orders, refinancing developments and currency movements that either support or undermine management’s forecast. Evidence obtained after the reporting date frequently provides a strong test of whether the going-concern assumption holds.

ISA 570 requirements versus practical Ghana checks

4. Financing, covenants and refinancing assessments

In an environment of tight liquidity and elevated interest rates, financing is often the pivot point on which the going-concern conclusion turns. Auditors must move beyond confirming that debt exists to assessing whether it can be serviced and, critically, whether maturing obligations can be refinanced.

Debt maturities and creditor classifications

Build a maturity profile of all borrowings, distinguishing short-term and long-term obligations and identifying facilities falling due within the going-concern assessment period. Pay close attention to the classification of liabilities: a borrowing that is technically in default of a covenant may need to be reclassified as current, which can transform the working-capital picture and trigger going-concern doubt.

Covenant testing and communication with lenders

Test compliance with all financial and non-financial covenants at the reporting date and against forecast performance. Where a breach has occurred or is likely, obtain evidence of any waiver, standstill or forbearance, and confirm its terms in writing directly with the lender. A verbal assurance of support is generally not sufficient audit evidence. Sample enquiries to management and lenders should include:

• Have any covenants been breached, or are any expected to be breached, within the assessment period?
• What waivers or amendments have been agreed, and are they documented and unconditional?
• What committed, undrawn facilities are available, and on what terms and conditions?
• Has the lender indicated any intention to withdraw, reduce or reprice facilities?

Access to refinancing and market availability

Whether refinancing is genuinely available depends heavily on prevailing market conditions. Auditors should assess the realism of management’s refinancing plans against the current lending environment, informed by Bank of Ghana policy signals on liquidity and interest rates. A refinancing assumption that rests on securing new credit at historically low rates, in a market where credit has tightened, should be challenged robustly and supported by evidence such as term sheets, letters of intent or committed facilities.

5. FX volatility, imported input inflation and pricing power, what auditors should assess

Foreign-exchange risk is one of the defining going-concern issues for many Ghanaian entities, and the going concern in uncertain economy, auditors should examine here with particular care. Currency movements can simultaneously inflate the cost of imported inputs and increase the local-currency burden of foreign-currency debt.

How FX moves affect cash flow and working capital

Consider an importer that sources raw materials in US dollars but sells in cedis. A material depreciation of the cedi raises input costs immediately, while the ability to raise selling prices may lag or be constrained by competition, compressing margins and draining working capital. Now consider an entity with foreign-currency borrowings: a depreciation increases the local-currency value of both the principal and the interest, and can push debt-service coverage below sustainable levels. Auditors should quantify these exposures rather than describing them qualitatively, mapping the currency composition of revenues, costs, assets and liabilities.

Hedging and natural hedges

Where management asserts that FX risk is mitigated, the auditor must evaluate the evidence. For financial hedges, examine the hedging instruments, their coverage ratio, tenor and counterparty. For natural hedges, for example, foreign-currency revenues offsetting foreign-currency costs, test whether the offset is genuine and reliable in timing and amount. A claimed hedge that does not stand up to scrutiny leaves the entity exposed, and the going-concern assessment should reflect that unhedged position under realistic exchange-rate scenarios.

6. Management forecasts, sensitivity analysis and stress-testing

The heart of a robust going-concern assessment is a credible, tested cash-flow forecast. Management prepares it; the auditor must challenge it. In an uncertain economy should auditors accept a single, optimistic base case? No, sensitivity and stress-testing are essential.

Designing scenario and sensitivity tests

Auditors should evaluate management’s forecast under multiple scenarios: a base case reflecting management’s central expectations, a downside case reflecting plausible deterioration, and a severe-but-plausible downside case. Illustrative stress parameters, calibrated against Ghana’s macro conditions, might include:

• Revenue shock: a range of reductions against the base case (for example 10% to 30%) to reflect demand contraction.
• FX depreciation: a further material depreciation of the cedi against key trading currencies.
• Cost inflation: input and overhead cost increases aligned to the latest CPI trends published by the Ghana Statistical Service.
• Financing stress: loss of an undrawn facility or an increase in borrowing costs.

The purpose is to identify the point at which the entity’s liquidity is exhausted and to test whether management’s mitigating actions are realistic and within its control.

Verifying assumptions

Forecast assumptions must be corroborated, not assumed. Test projected revenue against signed contracts, confirmed customer orders and historical conversion rates. Verify opening cash and available facilities against bank confirmations. Compare projected margins with recent actuals and challenge any unexplained improvement. Where management assumes cost savings or price increases, seek evidence that these are achievable in the current market.

Related-party support and contingent arrangements

Where forecasts rely on support from a parent, shareholder or related party, the auditor should obtain documented evidence of a binding or firmly committed arrangement, a letter of support alone is often insufficient. Assess the provider’s own financial capacity to deliver on that commitment, and corroborate with bank or third-party confirmations. Contingent arrangements that are conditional or discretionary should generally not be relied upon as the basis for a going-concern conclusion.

7. Impairments, liability classification and disclosure considerations

Going-concern pressures rarely arise in isolation; they frequently coincide with impairment triggers and reclassification issues that must be addressed in the financial statements.

Impairment evidence

Economic deterioration can itself be an impairment indicator. Auditors should test whether the carrying amounts of assets, including property, plant and equipment, goodwill and intangibles, remain recoverable under current conditions. The same downside assumptions used in the going-concern stress-testing should feed into impairment models to ensure consistency across the audit conclusions.

Classification of liabilities

Where covenants have been breached or facilities have become repayable on demand, liabilities previously presented as non-current may require reclassification as current in accordance with the applicable financial reporting framework. Such reclassifications can materially worsen the working-capital position and are often the trigger for going-concern doubt. Auditors must verify the classification against the terms of the loan agreements and the status of any waivers as at the reporting date.

Disclosures and modified opinions

Where a material uncertainty exists, the financial statements must disclose it clearly, including the principal events or conditions, management’s plans, and, where possible, quantified sensitivity analysis. The auditor’s reporting response depends on the adequacy of those disclosures. Where a material uncertainty exists and is adequately disclosed, the auditor typically includes a separate “Material Uncertainty Related to Going Concern” section drawing attention to it while expressing an unmodified opinion. Where disclosures are inadequate, or where use of the going-concern basis is inappropriate and the effect is material, the auditor modifies the opinion in accordance with ISA 570. The decision should always be evidence-driven and clearly documented.

8. Practical checklist, sample procedures and a one-page audit action plan

To bring the guidance together, the following checklist gives audit teams a practical evidence list for going-concern work in the Ghanaian context.

Going-concern audit checklist for Ghanaian audit teams

1. Obtain management’s going-concern assessment covering the period required by the applicable framework (at least twelve months from the reporting date, or the date of approval of the financial statements where relevant).
2. Prepare a macro dossier from GSS, Bank of Ghana, IMF and World Bank sources.
3. Compute liquidity, defensive intervals, current ratio and debt-service coverage.
4. Build a debt-maturity profile and check liability classifications.
5. Test covenant compliance at and beyond the reporting date.
6. Confirm covenant waivers or forbearance directly with lenders in writing.
7. Obtain bank confirmations for balances and undrawn facilities.
8. Map foreign-currency exposures across revenues, costs, assets and liabilities.
9. Evaluate hedging arrangements and test claimed natural hedges.
10. Verify forecast revenue against contracts and confirmed orders.
11. Run base, downside and severe-downside stress scenarios.
12. Assess related-party support for binding commitment and provider capacity.
13. Test impairment indicators using consistent downside assumptions.
14. Review subsequent events and post-year-end receipts.
15. Evaluate the adequacy of going-concern disclosures and conclude on the reporting response.

Conclusion and next steps for audit teams

In today’s climate and economic uncertain business environment, auditors should approach going concernas one of the highest-risk judgments in the entire audit. The practical priorities are consistent: gather objective macro data, challenge and stress-test management’s forecasts, quantify foreign-currency and refinancing exposures, corroborate covenant and support arrangements with third parties, and ensure any material uncertainty is disclosed clearly. Ahead of year-end audits, teams should refresh their macro dossiers, plan covenant and lender confirmations early, and agree stress-test parameters at the planning stage so that going-concern work is embedded rather than bolted on at the end.

For audit advisory support in Ghana, contact our GLE advisor for audit & assurance advisory services via the Global Law Experts advisor profile. You can also read more about GLE’s expanded Audit & Assurance capabilities in Ghana.

Sources

1. International Auditing and Assurance Standards Board (IAASB), ISA 570 (Revised) Going Concern
2. Institute of Chartered Accountants, Ghana (ICAG)
3. Bank of Ghana
4. Ghana Statistical Service
5. International Monetary Fund, Ghana
6. World Bank, Ghana Country Overview
7. Ministry of Finance, Ghana