Wiley Practitioner's Guide to GAAS 2020

14AU-C 450 Evaluation of Misstatements Identified during the Audit

Scope

Definitions of Terms

Objective of AU-C Section 450

The Nature and Causes of Misstatements

Requirements

Accumulation of Misstatements

Communication and Correction of Misstatements to Management

Evaluating the Effect of Uncorrected Misstatements

The Qualitative Characteristics of Misstatements

Prior Period Misstatements

Misstatement Worksheet

Documentation Requirements

SCOPE

The auditor must evaluate the effect of identified misstatements and uncorrected misstatements. AU-C 450 provides guidance on the evaluation.

DEFINITIONS OF TERMS

Source: AU-C 450.04. For definitions related to this standard, see Appendix A, “Definitions of Terms”: Misstatement, Uncorrected misstatements.

OBJECTIVE OF AU-C SECTION 450

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

(AU-C Section 450.03)

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 disclosures that are not in accordance with the applicable financial reporting framework
• An incorrect accounting estimate arising from, for example, an oversight or misinterpretation of ...