ACCA AA Syllabus B. Planning And Risk Assessment - Auditor Objectives - Notes 1 / 2
ISA 200 says “to obtain reasonable assurance, the auditor shall obtain sufficient appropriate evidence to reduce audit risk to an acceptably low level”
ISA 315 extends this “to identify and assess the risk of material misstatement...designing and implementing responses to the assessed risks of misstatement”
Misstatement
ISA 450 Evaluation of Misstatements Identified During the Audit states that this occurs when something in the accounts is not in accordance with the applicable financial reporting framework
They can arise from error or fraud
There are 3 categories...
Factual Misstatements
Those where there is no doubt
Judgmental misstatements
Those where the managements judgements on estimates not considered reasonable or the policies are inappropriate
Projected misstatements
These come from extrapolating misstatements in samples across a population
Uncorrected Misstatements
Misstatements that the auditor has accumulated during the audit and that have not been corrected.
The auditor has a responsibility to accumulate misstatements which arise over the course of the audit unless they are very small amounts.
Identified misstatements should be considered during the course of the audit to assess whether the audit strategy and plan should be revised