Wiley Practitioner's Guide to GAAS 2022

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. AU-C 700 and AU-C 703 address the auditor's responsibility to form an opinion based on the audit evidence obtained. (AU-C 450.01)

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 an amount or disclosure, including inadequate or incomplete disclosures and omission of disclosures required to meet disclosure objectives of financial reporting framework
• Financial statement disclosures ...