ACCA Strategic Professional · Advanced Audit and Assurance (International) · Developments in sustainability assurance
Bluewave plc's sustainability report states total water withdrawal of 2,000 megalitres. During a reasonable assurance engagement, the practitioner finds an unadjusted overstatement of 90 megalitres at one site, and a second misstatement of 60 megalitres understatement at another site. Management refuses to correct either. The practitioner's quantitative materiality is 120 megalitres and the misstatements are not qualitatively significant. Which is the most appropriate evaluation?
The uncorrected misstatements total 150 megalitres when added without offsetting (90 plus 60), which exceeds the 120 megalitre materiality. Misstatements in different areas should not be netted. If management refuses correction, the practitioner should modify the conclusion because the aggregate misstatement is material.
- AThe net misstatement is 30 megalitres, so it is below materiality and no modification is needed
- BThe aggregate of uncorrected misstatements is 150 megalitres, which exceeds materiality, so the practitioner should consider the effect on the conclusion and modify it if management does not correctCorrect
- COnly the 90 megalitre misstatement matters because understatements are ignored
- DMateriality does not apply to non-financial metrics, so the practitioner should report both as findings only
Explanation
Misstatements are accumulated in absolute terms, not netted: 90 + 60 = 150 megalitres, exceeding 120 megalitres. The practitioner must evaluate whether uncorrected misstatements are material, individually or in aggregate, and modify the conclusion if they remain uncorrected. Netting to 30 megalitres wrongly offsets different errors. Materiality does apply to sustainability information.
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