The Problem: Inconsistency Between the Auditor's Conclusion and the MD&A
ASC 205-40 requires that when substantial doubt about a company's ability to continue as a going concern is raised, the financial statements include specific disclosures about the conditions, management's plans to alleviate the doubt, and whether those plans are probable of success. The MD&A must be consistent with those disclosures and with the auditor's going concern conclusion. In practice, MD&A sections are often drafted before the auditor's final position is known, and reconciling the two under deadline pressure — while ensuring the disclosure doesn't create additional SEC comment risk — is a task that typically requires significant legal and accounting coordination.
Drafting in Workiva, Cross-Referenced to iManage and NetDocuments
An AI Labor Company agent ingests the auditor's representation letter and draft going concern conclusion from iManage or NetDocuments, identifies the specific conditions and mitigating factors cited by the auditors, and drafts ASC 205-40-compliant going concern language for both the financial statement footnote and the MD&A in Workiva. The agent cross-references the MD&A draft against the auditor's letter to surface any inconsistencies in characterization — whether management's plans are described as probable versus reasonably possible, for example — and generates an SEC comment-risk checklist based on current staff guidance and recent going concern comment patterns.
The Business Case: Filing Accuracy That Protects Against SEC Review and Shareholder Claims
A 10-K with going concern disclosure that is internally inconsistent or inconsistent with the auditor's conclusion draws SEC comment letters, often requiring an amended filing that creates additional public disclosure obligations and shareholder scrutiny. For companies already under liquidity pressure, an SEC inquiry compounds the operational distraction at the worst possible time. An agent that can reduce the disclosure preparation effort by 50–70% and surface inconsistencies before filing — not after — is not primarily an efficiency play. It's a risk management tool that protects the CFO's personal certifications under Sarbanes-Oxley and reduces the probability of post-filing complications. The agent is typically live and producing draft disclosure within about 8 weeks of engagement.
Does the agent draft the going concern footnote or only the MD&A?
Both. The agent drafts the ASC 205-40 financial statement footnote and the MD&A disclosure in Workiva, then cross-references them for consistency with each other and with the auditor's conclusion. The Diligent board reporting package can also be updated to reflect the going concern disclosure for audit committee purposes.
Can the agent help prepare management's plan to alleviate substantial doubt?
The agent can structure and draft the management plan narrative based on the remediation actions already identified by the CFO and legal team — refinancing activity, asset sales, covenant waivers, equity raises, and cost reduction programs. The underlying business judgments about what remediation actions are available are the CFO's; the agent handles the disclosure framing and ASC 205-40 compliance review.