This International Standard on Auditing (ISA) addresses the auditor's responsibility in evaluating the effect of misstatements identified in the audit, as well as uncorrected misstatements, if any, in the financial statements. ISA 700 addresses the auditor's responsibility in forming an opinion on the financial statements and concluding whether reasonable assurance has been obtained as to whether the financial statements as a whole are free from any misstatement (s) of relative importance. The auditor's conclusion required by ISA 700 takes into account the auditor's evaluation of the uncorrected misstatements, if any, on the financial statements in accordance with this ISA.ISA 320 addresses the auditor's responsibility to apply the concept of materiality appropriately when planning and performing an audit of financial statements.
Incorrect. Difference between the amount, classification, presentation, or disclosure of an item included in the financial statements and the amount, classification, presentation, or disclosure of information required for that item in accordance with the applicable financial reporting framework. The inaccuracies may be due to errors or fraud.
Uncorrected mistakes. Inaccuracies that the auditor has accumulated during the performance of the audit and that have not been corrected.
Accumulation of the erroneous representations identified. The auditor should accumulate the misstatements identified during the audit, other than those deemed to be clearly insignificant (not the same as "not material").
A3. … It may be useful to distinguish between factual inaccuracies, misjudgments and extrapolated inaccuracies:
- Misstatements of fact are misstatements about which there is no doubt. Misstatements of judgment are differences arising from management's judgments regarding accounting estimates that the auditor considers unreasonable, or that the selection and / or application of policies Accounting errors are considered inappropriate. Extrapolated inaccuracies are the auditor's best estimate of inaccuracies in populations, which involves projecting inaccuracies identified in audit samples to the total populations from which the samples were drawn.
Communication and correction of misrepresentations
The auditor shall promptly report all inaccuracies identified and accumulated during the audit to the appropriate level of management, unless prohibited by law or regulation. The auditor should request management to correct such inaccuracies.
Assessment of the effect of uncorrected inaccuracies
Before evaluating the effect of uncorrected misstatements, the auditor should reassess the materiality determined in accordance with ISA 320 to confirm whether it remains appropriate in the context of the entity's actual financial results.
Assessment of the effect of uncorrected inaccuracies
The auditor should determine whether the uncorrected inaccuracies are material, either individually or in aggregate. In making this determination, the auditor should consider:
- The amount and nature of erroneous representations, both in relation to certain types of transactions, account balances or disclosures *, related to the financial statements considered as a whole and the particular circumstances of their occurrence, and The effect of uncorrected inaccuracies related to previous years on the relevant types of transactions, account balances or disclosures, in relation to the financial statements considered as a whole.
(*) Effect of restrictive clauses of debt contracts.
Written manifestations
The auditor should request written representation from management and, where appropriate, from those charged with governance, whether they believe the effects of uncorrected misstatements are not material, either individually or in aggregate, for the financial statements considered as a whole. A summary of these items must be included in full in the relative report, or as an annex to the relative written representation.
The auditor must include in the audit documentation:
- The amount below which the inaccuracies would be considered as clearly insignificant (without relative importance); All the inaccuracies accumulated during the audit and if they have been corrected; yThe auditor's conclusion as to whether the uncorrected inaccuracies are material, either individually or in aggregate, their specific effect on the financial statements and the basis for their conclusions.
