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

Zenith Audit is completing the audit of Karoo Retail Ltd. Planning materiality was 200,000 and the clearly trivial threshold was 10,000. During the audit the team recorded several misstatements, including some individually below 10,000. Under ISA 450, which approach to the uncorrected misstatements is correct?

The auditor accumulates all identified misstatements other than those that are clearly trivial and communicates them to management on a timely basis. The accumulation threshold is the clearly trivial level, not materiality, because small items may add up to a material amount.

  1. AAccumulate all misstatements except those that are clearly trivial, and communicate them to management on a timely basisCorrect
  2. BAccumulate only misstatements above planning materiality, since all smaller items are immaterial by definition
  3. CIgnore uncorrected misstatements if the total is less than overall materiality, without informing management
  4. DAccumulate all misstatements including clearly trivial ones, and report each to those charged with governance

Explanation

ISA 450 requires the auditor to accumulate misstatements identified during the audit, other than those that are clearly trivial, and to communicate them to the appropriate level of management on a timely basis. Option B wrongly uses planning materiality as the accumulation threshold. Clearly trivial is a much lower level than materiality.

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