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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Completion and final review

At the completion stage of the audit of Alder Systems, the auditor has communicated uncorrected misstatements to management, who decline to correct them. Under ISA 450, what must the auditor do next regarding those charged with governance?

The auditor must communicate uncorrected misstatements and their possible effect on the opinion to those charged with governance, request correction, and obtain a written representation that management and, where appropriate, those charged with governance believe the effects are immaterial to the financial statements as a whole.

  1. ANothing, because only corrected misstatements are reported to those charged with governance
  2. BCommunicate the effect of uncorrected misstatements on the opinion, request correction and request a written representation on whether the effects are considered immaterialCorrect
  3. CReport them only if they exceed overall materiality, and then only orally
  4. DCommunicate them to the regulator before informing management

Explanation

ISA 450 requires the auditor to communicate uncorrected misstatements and their effect, individually or in aggregate, to those charged with governance, request their correction, and obtain a written representation from management and, where appropriate, those charged with governance that the effects are immaterial. Option C wrongly limits communication to items above materiality.

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