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Auditing & Assurance › Audit Risk & Materiality

How do you evaluate misstatements found during the audit?

Intermediate

Answer

Accumulate identified misstatements (other than clearly trivial), consider whether individually or in aggregate they're material (quantitatively and qualitatively), request management to correct them, and evaluate uncorrected misstatements against materiality—including the effect of prior-period uncorrected items. Material uncorrected misstatements affect the opinion.
Uncorrected misstatements total 90,000 vs materiality 100,000
  -> below materiality, but assess qualitative factors and trend.
Real-world example The team aggregates uncorrected errors, finds them just below materiality, but flags a qualitative concern for the audit committee.

Common follow-ups: What is a 'clearly trivial' threshold? | How do prior-year misstatements factor in?

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All 18 Audit Risk & Materiality questions