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Completion

Evaluation of misstatements

ISA 450 Evaluation of Misstatements Identified During the Audit provides the
following guidance.

4.1 During the audit

The auditor must:

 Accumulate a record of all identified misstatements, unless they are clearly
trivial.

 Consider if the existence of such misstatements indicates that others may exist,
which, when aggregated with other misstatements, could be considered
material.

 If so, consider if the audit plan and strategy need to be revised.

 Assess the materiality of the matter (both quantitative and qualitative).

 Report all misstatements identified during the course of the audit to an
appropriate level of management on a timely basis.

 Request that all misstatements are corrected.

 If management refuses to correct some or all of the misstatements the auditor
should consider their reasons for refusal and take these into account when
considering if the financial statements are free from material misstatement.

4.2 At the end of the audit

Evaluate the effect of the uncorrected misstatements. If management have failed to
correct all of the misstatements reported to them, the auditor should:

 Revisit their assessment of materiality to determine whether it is still appropriate
in the circumstances.

 Determine whether the uncorrected misstatements, either individually or in
aggregate, are material to the financial statements as a whole.

 Report the uncorrected misstatements to those charged with governance and
explain the effect this will have on the audit opinion.

 Request a written representation from those charged with governance that they
believe the effects of uncorrected misstatements are immaterial.

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