SA 450

Question 1

Objective of SA

Answer 1

Effect of :
1. identified misstatements on audit
2. uncorrected misstatements on FS if any

Question 2

JIO

Sources of misstatement

Answer 2

• Judgement of mgmt- inappropriate or unreasonable
• Inaccuracy in gathering/processing data
• Incorrect a/c estimate
• Omission of amt/disclosure

Question 3

Accumulation of identified misstatements

Answer 3

• other than clearly trivial-accumulate
• designate amount-below which trivial-not material effect on FS
• any uncertainty - if trivial or not - matter is considered not to be clearly trivial

clearly trivial ≠ not material : smaller magnitude + inconsequential

Question 4

Types of misstatements

Answer 4

• FACTUAL : No doubt
• JUDGEMENTAL : Difference in judgements of management
• PROJECTED : Best estimate

Question 5

Uncorrected misstatements

Accumulated during audit,but not corrected

Answer 5

1. Reassess materiality (SA 320)
2. Determine if they are material
   - size & nature & circumsatnce of occurence
   - effects of uncorrected misstatements related to prior periods
3. Communicate with TCWG - identify individually,request to be corrected
4. WR - if effects are immaterial
5. Conclusion : mgmt refuses to correct or if audit procedures don’t enable to conclude immateriality, report accordingly.