Identified misstatements - the auditor will need to consider revising the overall plan if:
- the misstatements identified indicate that other misstatements may exist, which when accumulated could be material
- accumulated misstatements approach the materiality level set for the audit
Where management has corrected misstatements detected…
The auditor shall perform additional procedures to determine whether misstatements remain
Communication and correction of misstatements
- the auditor shall inform management of all misstatements and request that they be corrected
- if management refuse, the auditor shall ascertain the reason and take this into account in the overall evaluation
Examining the effect of uncorrected misstatements
- reassess materiality
- determine whether uncorrected misstatements are material, whether individually or aggregate
What will materiality depend on?
The nature of the misstatement and its impact on the FS. The auditor is required to inform those charged with governance and to request that corrections be made
Written representations
- The auditor shall request confirmation from management that the effect of uncorrected misstatements is immaterial
Documentation - audit documentation shall include:
- amount below which misstatements are considered trivial
- all misstatements accumulated
- auditor’s conclusion regarding materiality of uncorrected misstatements
What are the first two circumstances that may cause an auditor to deem misstatements material even if they are below materiality level?
- compliance with regulatory requirements
- masking a change in trends or affecting ratios
What are the other two circumstances that may cause an auditor to deem misstatements material even if they are below materiality level?
- increasing management compensation
- affecting other information in documents included within the audited FS
