Only on
OpenTuition
you can find: Free ACCA notes
•
Free ACCA lectures
•
Free ACCA tests
•
Free ACCA tutor support
•
The largest ACCA community
At some point optimism and wishful thinking will become more like deliberate misstatement and
fraud: making demonstrably undue claims about company performance and the deliberate omission
of liabilities.
Management bias is a common element of AAA questions: many describe bonus schemes or buy-outs
and you must respond to these by recognising the increased audit risk that inevitably arises.
4. Evaluation of misstatements identified
ISA 450
Evaluation of Misstatements Identified during the Audit
requires auditors to accumulate
identified misstatements other than those which are clearly trivial. The triviality threshold will
generally be much lower than the materiality threshold.
๏
All misstatements accumulated during the audit should be communicated to the appropriate
level of management on a timely basis.
๏
Management should correct them or explain why not. Often the audit committee will be
involved in these discussions. Misstatements can be categorised as:
‣
Factual (definitely incorrect, like a mistake when adding up the stock-take sheets).
‣
Judgmental (where the auditor and client have different opinions, such as the valuation of
inventory or recoverability of debts).
‣
Projected. The auditors best estimate of the error of a population based on the errors in the
audit sample.
๏
The categorisations affect how much negotiation or compromise is acceptable when it comes to
amending the financial statements:
‣
no room for compromise with factual misstatements
‣
discussion of judgmental errors may reach a compromise
‣
extended testing to find actual errors rather than make adjustments for projected errors.
๏
Obtain written representations from management that they believe uncorrected misstatements
are not material or their reasons for believing that certain uncorrected misstatements are not
misstatements.
๏
Assess materiality of uncorrected misstatements individually and in aggregate. Note that
materiality levels may have been revised as the audit progressed (ISA 320
Materiality in Planning
and Performing an Audit
).
If management refuses to correct a misstatement which the auditor thinks is material then the auditor
will have to issue a qualified opinion (or adverse if the matter is pervasive).
Note it is management’s responsibility to correct errors in the financial statements. Auditors cannot
unilaterally adjust the financial statements that have been prepared by management.
Do'stlaringiz bilan baham: