A3 Audit & Fraud Risk PT 2

Question 1

Distinguish between the 3 types of material misstatements.

Answer 1

1. Factual Misstatement : misstatements about which there is no doubt.
2. Judgmental Misstatements : Managements and the auditor have materials judgement differences on accounting estimates or application of accounting policies.
3. Projected Misstatement: This represents the auditor’s best estimate of misstatement in populations, by projecting misstatements in an audit sample to the population from which the sample were drawn.