Evaluation of Misstatements

Communication

In accordance with ISA 450 Evaluation of Misstatements Identified During the Audit all misstatements should be communicated to management on a timely basis, unless they are clearly trivial. Management should be asked to correct all misstatements identified during the audit. Auditors should try and obtain an understanding of management's reasons for refusing to adjust any of the misstatements. The auditor should determine whether uncorrected misstatements are material in aggregate or individually, and if material should consider the potential impact on their audit report.

Materiality

Prior to evaluating the significance of uncorrected misstatements the auditor should reassess materiality to confirm whether it remains appropriate to the financial statements. Then the auditor must assess whether uncorrected misstatements are, individually or in aggregate, material. To do this they should consider the size and nature of the misstatements, both in relation to the financial statements as a whole and to particular classes of transaction, account balances and disclosures.

Written representations

Finally, the auditor should obtain a written representation from management and those charged with governance that they believe the effect of the uncorrected misstatements is immaterial, individually and in aggregate.

Once these procedures have been completed the auditor should then consider the impact of uncorrected misstatements on the audit report.

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Tags:	misstatement;materiality