Going Concern
/ˈɡəʊɪŋ kənˈsɜːn/
Going concern is the accounting assumption that a company will keep trading for the foreseeable future, underpinning how its accounts are prepared.
Going concern is the accounting assumption that a company will keep trading for the foreseeable future, underpinning how its accounts are prepared.
A statutory audit is an independent examination of a company's financial statements carried out by a registered statutory auditor, resulting in a formal opinion on whether the accounts give a true and fair view of the company's financial position and comply with the applicable accounting framework. In Ireland, the obligation to have a statutory audit is set out in the Companies Act 2014 and applies to most companies unless they qualify for the audit exemption.
The purpose of a statutory audit is to give shareholders, lenders, suppliers, and other stakeholders confidence that the numbers reported in the company's annual accounts can be relied on. Unlike an internal review or a management accounts pack, a statutory audit is performed by a firm independent of management, bound by professional standards, and regulated in Ireland by the Irish Auditing and Accounting Supervisory Authority. The audit opinion attached to a set of statutory accounts is a public document filed on the Companies Registration Office register, and any qualifications or adverse findings are visible to anyone who searches the company.
For early-stage founders, the statutory audit is often perceived as a compliance cost rather than a value add, but it serves important protective functions. It provides an external check on the integrity of your financial reporting, it can uncover weaknesses in internal controls before they become serious problems, and it is often a prerequisite for raising debt finance, attracting institutional investors, or preparing for a future exit.
The default position under Irish company law is that every company must have its annual accounts audited. However, the Companies Act 2014 provides a significant exemption for small and dormant companies that meet the qualifying criteria. To claim the audit exemption as a small company, the entity must meet at least two of three size tests in the current and preceding financial year: turnover not exceeding a prescribed threshold, balance sheet total not exceeding a prescribed threshold, and an average number of employees not exceeding a prescribed threshold.
Group companies are assessed on a consolidated basis, which means even a small subsidiary may lose its exemption if its parent group exceeds the size tests. Listed companies, public limited companies, and certain regulated entities such as credit institutions and insurers must always be audited regardless of size. Companies that fail to file their annual returns on time with the CRO lose the audit exemption for the subsequent two financial years as a penalty, which can be an unwelcome surprise for founders who miss a filing deadline.
Shareholders who together represent at least 10% of the voting rights can also require the company to be audited even where the exemption is otherwise available. This minority protection is commonly relied on by investors in early-stage companies to ensure oversight of financial reporting, and it is often written into shareholders' agreement provisions as a standing right for investor directors.
A statutory audit typically follows a structured cycle. Planning begins before the financial year end, with the auditor reviewing the company's internal controls, identifying risk areas, and agreeing the scope of work. Interim fieldwork may be performed during the year to test transaction flows and controls. After year end, the substantive audit work begins, including verification of balances, testing of significant transactions, and review of management's accounting estimates.
The auditor then issues a report containing their opinion. An unqualified or clean opinion states that the accounts give a true and fair view and comply with the relevant framework. A qualified opinion identifies specific matters where the auditor could not obtain sufficient evidence or disagrees with management's treatment. An adverse opinion is issued where the accounts are materially misstated, and a disclaimer is issued where the auditor cannot form an opinion at all. Any opinion other than unqualified is a significant red flag for investors, lenders, and counterparties.
During the audit, management will be asked to provide a representation letter confirming key assertions, and the auditor will typically issue a management letter at the end identifying control weaknesses and recommendations. Board directors have statutory duties to cooperate with the auditor, and the board of directors is ultimately responsible for ensuring that the accounts are properly prepared and that the audit process is facilitated.
If your company is approaching the audit thresholds or if an investor is likely to require audits, start preparing well before the first audit year. Good bookkeeping, clear documentation of material transactions, properly supported accounting estimates, and robust internal controls will materially reduce audit time, cost, and disruption. Auditors charge by time spent, so clean records translate directly into lower fees.
Selecting the right auditor is also important. The Big Four firms are well known but often expensive and less interested in smaller engagements. Mid-tier and specialist firms can offer better value and sector-specific expertise. For technology startups, look for an auditor with experience in SaaS revenue recognition, share-based payments, and research and development tax credits, as these are areas where inexperienced auditors can cause significant delays and additional costs.
Finally, treat the first audit as an investment in your company's operational maturity rather than a box-ticking exercise. The findings and recommendations from an early audit, properly actioned, will strengthen your financial controls and reporting ahead of future fundraising rounds or exit processes, where audited accounts are almost always a baseline expectation.
