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CA Intermediate · Auditing and Ethics · Completion and Review

During the audit of Sundaram Pharma Ltd, the auditor finds uncorrected misstatements aggregating Rs 8 lakh, all individually below the clearly trivial threshold except one of Rs 5 lakh. Overall materiality is Rs 40 lakh. Management refuses to correct them, saying they are immaterial. Under SA 450, what should the auditor do?

The auditor should communicate all misstatements that are not clearly trivial to those charged with governance and request correction. SA 450 requires this even where the total is below overall materiality, and the effect of uncorrected items on the opinion must still be evaluated. Withdrawal or ignoring them is not the required response.

  1. ACommunicate all misstatements, other than those that are clearly trivial, to those charged with governance and request that they be correctedCorrect
  2. BIgnore all of them because the total is below overall materiality of Rs 40 lakh
  3. CAccumulate only those above overall materiality and report only these
  4. DWithdraw from the engagement as management has refused correction

Explanation

SA 450 requires the auditor to accumulate misstatements other than clearly trivial ones and communicate them on a timely basis to the appropriate level of management, then to those charged with governance if uncorrected, and to request correction. Being below materiality does not remove the duty to communicate. The auditor must also obtain a written representation on uncorrected items and evaluate their effect on the opinion.

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