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

Orchard Ltd's audit is nearly complete. Uncorrected misstatements total $40,000 against overall materiality of $200,000. Management declines to correct them, saying they are immaterial. Under ISA 450, what must the auditor do regarding communication with those charged with governance (TCWG)?

The auditor must communicate the uncorrected misstatements to those charged with governance and request that they be corrected. This applies even where the total is below materiality, because ISA 450 requires uncorrected items to be communicated, not only material ones.

  1. ACommunicate the uncorrected misstatements to TCWG and request that they be correctedCorrect
  2. BSay nothing to TCWG because the total is below materiality
  3. CModify the opinion because management refused to correct them
  4. DResign from the engagement because management is uncooperative

Explanation

ISA 450 requires the auditor to communicate uncorrected misstatements to TCWG on a timely basis and request correction, even if they are below materiality. The auditor also asks for a written representation on them. Staying silent because the total is below materiality is wrong, as the duty applies to all accumulated uncorrected items.

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