Q2  The auditor should take into account the aggregate of all uncorrected misstatements including those involving estimates in his assessment of materiality in audit.
This Question is Old & Before SA 320 Came into Existence So Approach is little Different , Use Highlighted Summary to remember Answer, it will cover whole answer, given text also for reference.
 
SA 320 Reference / Importance of Materiality in Opinion / Individual & Aggregate
SA 320 “Materiality in Planning and Performing an Audit” requires that in forming his opinion on the financial information, the auditor should consider all material aspects, either individual or in aggregate which are relatively important for true and fair view of financial statements.
Aggregate Uncorrected Misstatements = Net Effect i.e Positive & Negative Impact on Profit & Net Assets of  Identified Uncorrected Misstatements of CY & PY + Estimated Other Misstatements 
As per SA 320, the aggregate of uncorrected misstatements comprises: (a) specific misstatements identified by the auditor including the net effect of uncorrected misstatements identified during the audit of previous periods; and (b) the auditor’s best estimate of other misstatements which cannot be specifically identified (that is, projected errors).
Estimated Other Misstatements = Identified through Analytical Procedures + Identified through Sampling in Test of Details 

After Identification it is estimated for population & confirmed through other substantive tests
The analytical procedures employed by the auditor may give him some indication about the existence of misstatements, which can be further substantiated by him through estimates process.

When an auditor uses audit sampling to test an account balance or class of transactions, he projects the amount of known misstatements identified by him in his sample to the items in the balance or class from which his sample was selected. That projected misstatement, along with the results of other substantive tests, contributes to the auditor’s assessment of aggregate misstatement in the balance or class.
Keep Qualitative Factors in Mind — i.e Involves Law Non Compliance / Intentional Fraud / Repetitive / Unexpected / Involves Pattern / Impact on Ratios & Key Figures Etc
In this context, the auditor should consider whether the effect of aggregate uncorrected misstatements on the financial information is material. Qualitative considerations also influence an auditor in reaching a conclusion as to whether the misstatements are material.
If Aggregate Uncorrected Misstatement >= Materiality — Then ask Management to Rectify or Extend Audit Procedures — If they dont adjust or after extended audit procedures dont give any clarity then Qualify / Adverse / Disclaimer as the case may be.
Impact of Misstatements: If the aggregate impact of the uncorrected misstatements that the auditor has identified approaches the materiality level, or if auditor determines that the aggregate of uncorrected misstatements causes the financial information to be materially misstated, he should consider requesting the management to adjust the financial information or extending his audit procedures. In any event, the management may want to adjust the financial information for known misstatements. The adjustment of financial information may involve, for example, application of appropriate accounting principles, other adjustments in amounts, or the addition of appropriate disclosure of inadequately disclosed matters. If the management refuses to adjust the financial information and the results of extended audit procedures do not enable the auditor to conclude that the aggregate of uncorrected misstatements is not material, the auditor should express a qualified or adverse opinion, as appropriate.

Q6 “Surprise Checks” help the auditors to ascertain whether the internal control system is operating effectively in a Company or not. Discuss.

Answer

1. Background
Reference of SA 315 & 330 / Approach = Understand Entity , Its Internal Controls System –> Assess Risk –> Design Audit Procedures –> Keep Risk within Acceptable Limits 
Surprise Checks: SA 315 & SA 330 “Identifying and Assessing the Risk of Material Misstatement Through Understanding the Entity and its Environment” and “The Auditor’s Responses to Assessed Risks” prescribes that “the auditor should obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. The auditor should use professional judgement to assess audit risk and to design audit procedures to ensure that it is reduced to an acceptably low level.”
1a. Understanding Entity Methods –> Observation + Inquiry + Inspection of Documents 
The understanding of the accounting and internal control system can be obtained in several ways including inspection of documents making inquires of appropriate management, observation of activities, etc.
1b. Designing Audit Procedures –> Surprise Check –> Focus of Surprise Check 
* ICS Operating Effectively + Concurrent Accounting & Other Records & Books are Upto Date 
It is in this context, surprise checks intend to ascertain whether the system of internal control is operating effectively and whether the accounting and other records are   prepared concurrently and kept up-to-date.
1b(i). ICS Operating Effectively — Computer Operations / Personnel Performance / Exact Manner of Processing / As per Management Prescription
Particularly, the observation of the entity’s activities and operations including observation of the organisation of computer operations, personnel performing control procedures and the nature of transaction processing on a surprise visit would reveal the exact manner in which the activities are being performed in the manner prescribed by the management.
1b(ii) Concurrent Accounting & Other Records & Books are Upto Date –> Manipulation & Frauds Occur Where Books are Not Upto Date / Errors Also Indicate Weakness In ICS Which Can be Misused for Fraud
It has often been found that manipulations and frauds are facilitated under a system of book-keeping, which does not give proper emphasis to the need to keep the books up-to-date. Errors in book-keeping are often indicative of weaknesses in internal control which may be taken advantage of in order to perpetrate frauds or manipulations.
2. Result of Surprise Check –> Identification of Errors & Frauds / Prompt Attention Of Management / Corrective Action / Moral Check on Employees
Surprise checks are a useful method of determining whether or not such errors exist and where they exist, of bringing the matter promptly to the attention of the management so that corrective action is taken immediately. Consequently, surprise visits by the auditor can exercise a good moral check on the client’s staff.
If this surprise check reveals any weaknesses in the system of internal control or any fraud or error or the fact that any book or register has not been properly maintained or kept up-to-date, the auditor should communicate the same to the management and ensure that action is taken on the matters communicated by him.

3.Guidance Note — Surprise Check Part of Normal Audit Procedures / Need & Frequency as per Circumstances / Depends on Reliance on ICS / Nature of Transactions / Number of Locations
The Guidance Note issued by the Institute on the subject specifies that surprise checks are a part of the normal audit and the results of such checks are therefore important primarily to the auditor himself in deciding the scope of his audit and submitting his report thereon. The need for and frequency of surprise checks is obviously a matter to be decided having regard to the circumstances of each audit. It would depend upon the extent to which the auditor considers the internal control system as adequate, the nature of the clients’ transaction, the locations from which he operates and the relative importance of items like cash, investments, stores etc.

4. Atleast Once in year / All findings doesnt form part of Audit Report / It helps in audit process.
However, wherever feasible a surprise check should be made at least once in the course of an audit.
It does not necessarily follow that all or any of the matters communicated to the management should form part of the auditor’s report on the accounts. Thus “surprise checks” help the auditors, during the course of their audit, to ascertain whether the internal control is operating effectively in a company or not.