Question

In: Accounting

When reviewing the summary of misstatements found in the​ audit, A. auditors only need to consider...

When reviewing the summary of misstatements found in the​ audit,

A.

auditors only need to consider the misstatements that impact the income statement.

B.

an adjusting journal entry must be made by the auditor for all material misstatements.

C.

auditors must combine individually immaterial misstatements to evaluate whether the combined amount is material.

D.

the auditor is not required to consider the impact on the current financial statements of misstatements in the prior year that were not corrected.

Solutions

Expert Solution

When reviewing the summary of misstatements found in the audit, the auditor should not only consider the material items as a whole but should also consider the individual immaterial items and combine them to look at the materiality of the misstatements.

Meteriality is a very subjective terms it differs from person to person however in accounting it is termed as an amount which influence the decision of the stakeholders.

While assessing the summary of misstatements auditor not only covers the income statement but also covers the balance sheet and other notes.further auditor is not supposed to make adjusting entries he can ask management to do it for all the identified misstatements.

Further it is also not correct that auditor should not consider previous years errors and its impact in current financial statements, but it is necessary to consider the errors of previous year and make the adjustments in opening and current year as necessary.

So the correct option is. -----C , i.e auditor must combine individual immaterial misstatements to evaluate whether the combined amount is material.

ekkarill92 answered 2 years ago
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