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Aksh asked 1 year ago

Sir. Can you please explain in short the flow of this answer?

1 Answers
RaviRavi Staff answered 1 year ago

Below is not exactly as per SA 320 but it is good theory

Point 1 – See Aggregate Effect of Uncorrected Misstatements

Material Misstatement (Individual vs Aggregate) :-
Auditor’s objective to give opinion whether FST is free from material misstatement / Misstatements can be material either individually or in aggregate / Consider effect of aggregate uncorrected misstatements.

Point 2 – How to compute aggregate uncorrected misstatements ? It includes 2 types of misstatement, where we have done 100% checking we get specific misstatement and where we do sampling we get projected misstatements.

 Aggregate Uncorrected Misstatements: –
Specific Misstatements (net effect) + Best estimate of other misstatements (projected misstatements)

Point 3 :- How to compute projected misstatements ?

 Projected Misstatements: –
Test of Details: – In audit sampling identified misstatements in sample are projected for population of TBD / Results of Other substantive test also help in projection / Analytical Procedures: – It gives indication about existence of misstatement, which is then substantiated though estimation process.

Point 4 :- What if material misstatements are not corrected ?

 Impact of Misstatements: –
If aggregate uncorrected misstatements approach materiality request management to adjust the same / adjustment may include adjustment in amounts, proper application of accounting principles, additional disclosure / If management refuses or result of additional procedures he is unable to conclude that aggregate is not material / express qualified or adverse opinion.

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