Audit. Identifying Misstatements in Financial Statements (Most Important)

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Audit. Identifying Misstatements in Financial Statements (Most Important)

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19. IDENTIFICATION OF MISTORTION IN THE FINANCIAL STATEMENTS

When evaluating the reliability of financial (accounting) statements, the auditor should determine whether the totality of uncorrected misstatements identified during the audit is material. The set of uncorrected misstatements includes:

1) specific misstatements identified by the auditor, including the results of uncorrected misstatements identified during a previous audit;

2) the auditor's best estimate of other misstatements that cannot be specifically identified (ie, predictable errors).

If the auditor concludes that misstatements could be material, the auditor should reduce audit risk by performing additional audit procedures or by requiring the entity's management to amend the financial (accounting) statements. Management has the right to amend the financial (accounting) statements taking into account the identified misstatements. If the entity's management refuses to amend the financial (accounting) statements, and the results of the extended (additional) audit procedures do not allow the auditor to conclude that the totality of uncorrected misstatements is not material, the auditor should consider appropriately modifying the auditor's report in accordance with with federal rule (standard) No. 6 "Auditor's report on financial (accounting) statements".

If the aggregate of uncorrected misstatements identified by the auditor approaches materiality, the auditor needs to determine whether it is probable that undetected misstatements, taken together with the aggregate of detected but uncorrected misstatements, could exceed the auditor's determination of materiality. Therefore, as the cumulative uncorrected misstatements approach the level of materiality, the auditor considers reducing the risk through additional audit procedures or requires the entity's management to amend the financial (accounting) statements to take into account the identified misstatements.

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