Material Misstatement

Question 1

Material misstatement

Answer 1

Here are the simplified smart notes:

Risk and Materiality (ISA 315 Revised 2019)

Risk Assessment

1. Identify and assess risks of material misstatement at:
   
   • Financial statement level (pervasive risks)
   • Assertion level (specific objectives)
2. Examples of financial statement level risks:
   
   • Management override of internal controls
3. Examples of assertion level risks:
   
   • Unrecorded liabilities
   • Existence of recorded assets

Documentation Requirements

1. Discussion among engagement team and significant decisions
2. Key elements of auditor’s understanding and sources of information
3. Evaluation of control design and implementation
4. Identified and assessed risks of material misstatement at financial statement and assertion levels