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Accountants Discussion Forum: When the File Doesn't Fit — Distress, Fraud and the Evidence Trail

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Overview   

This discussion forum focuses on what practitioners should do when the information and evidence on a file do not fit together, particularly where there are indicators of financial distress, fraud, or both. The session examines how to identify and connect distress and fraud indicators, challenge management’s going concern assessment, distinguish between key legal and reporting thresholds, and determine the appropriate professional and legal reporting obligations.  

Join Caryn Maitland CA(SA) as she explores practical approaches to assessing financial distress, fraud risk, going concern, reporting duties and evidence documentation, while preparing practitioners for the revised ISA 570 (Revised 2024) and ISA 240 (Revised 2025) requirements.  

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Learning objectives and competencies developed 

Through real-world case studies, practical examples and an in-depth analysis of the latest regulatory developments, this webinar will equip you with the following competencies: 

• Identify indicators of financial distress and fraud risk and connect them into a coherent overall assessment.  

• Distinguish between financial distress, solvency and liquidity, material uncertainty relating to going concern, and inappropriate use of the going concern basis of accounting.  

• Evaluate and challenge management’s going concern assessment, including cash flow forecasts, sensitivity analysis, reverse stress testing, covenant compliance and financial support arrangements.  

• Understand the key changes introduced by ISA 570 (Revised 2024) and ISA 240 (Revised 2025), including enhanced reporting, documentation and engagement partner responsibilities.  

• Determine applicable reporting duties relating to reportable irregularities, NOCLAR and reckless trading, and document professional judgements appropriately. 

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Content to be discussed 

The following topics are under discussion for this month:  

• Professional scepticism and identifying when something does not fit  

  • Professional scepticism and the questioning mind  

  • Recognising inconsistencies in evidence  

  • Management bias and explanations that do not reconcile  

  • Year-end pressure and the risk of “making the file fit”  

• Financial distress and going concern indicators  

  • Financial, operating and other going concern indicators  

  • Liquidity and cash flow deterioration  

  • Net current liability and net liability positions  

  • Covenant breaches and waiver requirements  

  • Arrear statutory liabilities  

  • Creditor pressure and stretched payment terms  

  • Companies Act section 128 “financially distressed” test  

  • Companies Act section 4 solvency and liquidity test  

  • Section 129 board resolution and business rescue considerations  

  • Material uncertainty relating to going concern  

  • Inappropriate use of the going concern basis of accounting  

• Challenging management’s going concern assessment  

  • Cash flow forecasts and budgets  

  • Key assumptions and management bias  

  • Sensitivity analysis and reverse stress testing  

  • Available facilities, refinancing and headroom  

  • Subsequent events and post year-end trading results  

  • Letters of financial support and subordination agreements  

  • Management’s plans and their feasibility  

  • Written representations and minimum evidence requirements  

  • IFRS for SMEs and full IFRS going concern and disclosure requirements  

• Revised auditing standards effective from 15 December 2026  

  • ISA 570 (Revised 2024) – Going Concern  

  • Enhanced risk assessment procedures  

  • Evaluation of management’s assessment and professional scepticism  

  • Explicit going concern statements and reporting requirements  

  • ISA 240 (Revised 2025) – Auditor’s Responsibilities Relating to Fraud  

  • Fraud risk identification and assessment  

  • Engagement team discussions and engagement partner responsibilities  

  • Fraud-related reporting and documentation  

  • Interaction with ISA 220 (Revised) and ISQM 1  

  • Implications for independent reviews and compilations  

• Fraud, NOCLAR and reportable irregularities  

  • Section 45 of the Auditing Profession Act – reportable irregularities  

  • Companies Regulation 29 – reportable irregularities by independent reviewers  

  • Definition, elements, timing and reporting process  

  • Non-compliance with laws and regulations (NOCLAR)  

  • Companies Act section 22 – reckless trading  

  • Directors’ duties and personal liability  

  • PRECCA section 34 reporting obligations  

  • Financial Intelligence Centre Act reporting obligations  

  • Confidentiality and applicable exceptions  

  • Documenting the decision to report or not to report  

• Case study: Kwezi Cold Storage  

  • Bill-and-hold arrangements and revenue recognition  

  • Cut-off and management override of controls  

  • Fraud risk factors and indicators  

  • Covenant breach and loan classification  

  • Going concern implications  

  • Impact on audit or independent review reports  

  • Reporting and disclosure consequences  

  • Practical evidence and documentation exercise  

• Practical year-end application  

  • Year-end going concern and fraud checklist  

  • Practical documentation standards  

  • Preparing for the revised standards in the 2027 audit cycle