Evaluate Misstatements identified During the Audit Flashcards
What is the auditors objectives with respect to misstatements on the financial statements?
1) Evaluate the effect of identified misstatements on the AUDIT
2) Evaluate the effect of uncorrected misstatements on the financial statements
Definition of misstatement?
A difference between amount, classification, presentation, or disclosure from the GAAP.
Matters that would prevent the F/S to be presented FAIRLY
What should the auditor do with identified misstatement?
Accumulate all misstatements except trivial misstatements
How should auditor communicate misstatements?
Timely
To appropriate level of management that can adjust the misstatement
If management refuses to correct misstatement, what should the auditor do?
1) Understand why they are unwilling to make an adjustment
2) what are the effects on the financial statement and document in the auditor report
Should the auditor access materiality based off the actual results of the F/S
YES! Reassess.
How should the auditor handle any uncorrected misstatements?
Are they material, what is the nature, size.
What is the effect on the current period and uncorrected prior periods
What is the documentation of the auditor with respect to materiality?
1) The threshold that is clearly trivial
2) All misstatements accumulated and whether they have been corrected
3) The auditor’s conclusion about materiality of uncorrected misstatements and in the aggregate
What are the three types of materiality and give explanation of each?
1) factual- there is no doubt
2) Judgmental- Differences due to the judgments of management that the auditor considers unreasonable or accounting policies that the auditor views as unreasonable
3) Projected misstatements- Estimate of misstatements in populations suggested by audit sampling.
