Let’s understand in detail about SA 450 Evaluation of Misstatement Identified During the Audit in detail
SA 450 Evaluation of Misstatement Identified During the Audit deals with the auditor’s responsibility to evaluate the effect of identified misstatements and uncorrected misstatements. SA 700 (Forming an opinion and reporting on financial statements) takes into account the evaluation of uncorrected misstatements for auditor’s conclusion SA 450 is effective for the audit of financial statements for periods beginning on or after 1st April 2010
Uncorrected Misstatement – Misstatement that the auditor has accumulated during the audit and that have not been corrected
Misstatement can be accumulated apart from those that are clearly trivial. As the audit progresses overall audit strategy and plan has to be revised if:
Before evaluating the effect of uncorrected misstatements, the auditor should reassess materiality per SA 320 to confirm whether it remains appropriate to the entity’s financial results by taking into account:
If in an auditor’s opinion, the effect of uncorrected misstatements is immaterial (individually or in aggregate) to the financial statements, a written representation should be obtained from the management with the summary of such items.