ECON 1 Lecture 15:
Document Summary
Known misstatements: the ones that auditor has specifically identified no doubt. Projected misstatements: auditor"s best estimate of total misstatements in given population based on sample. Judgmental misstatements: arise from material differences in judgements of auditor and client management concerning accounting estimates or the application of accounting principles. Summary of unadjusted audit differences (suad): schedule to accumulate the known and projected misstatements and the carryover effects to prior-year uncorrected misstatements. When auditor detects intentional misstatement, they: reconsider the level of audit risk for the client, consider revising the nature, timing and extent of audit procedures, evaluate whether to resign form the audit engagement. Detection of intentional misstatements likely signals the existence of an internal control weakness and certainly speaks to control environment deficiencies. Last period"s misstatements may affect the current period"s financial results. Sec staff accounting bulletin (sab) 108: addresses approach that auditors should use in both current-year and prior-year misstatements.
