Wiley Practitioner's Guide to GAAS 2015: Covering all SASs, SSAEs, SSARSs, PCAOB Auditing Standards, and Interpretations

AU-C 450 Evaluation of Misstatements Identified During the Audit

AU-C ORIGINAL PRONOUNCEMENT

Original Pronouncement

Statement on Accounting Standards (SAS) 122.

DEFINITIONS OF TERMS

Source: AU-C Section 450.04

Misstatement. A difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure required for the item to be presented fairly in accordance with the applicable financial reporting framework. Misstatements can arise from fraud or error.

Misstatements also include those adjustments of amounts, classifications, presentations, or disclosures that, in the auditor's professional judgment, are necessary for the financial statements to be presented fairly, in all material respects.

Uncorrected misstatements. Misstatements that the auditor has accumulated during the audit and that have not been corrected.

OBJECTIVES OF AU-C SECTION 450

AU-C Section 450.03 states that the objective of the auditor is to evaluate the effect of:

1. Identified misstatements on the audit and
2. Uncorrected misstatements, if any, on the financial statements

The Nature and Causes of Misstatements

A misstatement may consist of:

• An inaccuracy in gathering or processing data from which financial statements are prepared
• An omission of a financial statement element, account, or item, or information required to be disclosed under the applicable financial reporting framework
• Financial statement ...