Accumulation of MisstatementsAccumulation of Misstatements

Accumulation of Misstatements

1. Misstatements by nature or circumstances, accumulated as described in paragraphs A3‑A4, cannot be added together as is possible in the case of misstatements of amounts. Nevertheless, the auditor is required by paragraph 11 of this Auditing Standard to evaluate those misstatements individually and in aggregate (i.e., collectively with other misstatements) to determine whether they are material.
2. To assist the auditor in evaluating the effect of misstatements accumulated during the audit and in communicating misstatements to management and those charged with governance, it may be useful to distinguish between factual misstatements, judgemental misstatements and projected misstatements.

Misstatements in Disclosures

• Factual misstatements are misstatements about which there is no doubt.
• Judgemental misstatements are differences arising from the judgements of management including those concerning recognition, measurement, presentation and disclosure in the financial report (including the selection or application of accounting policies) that the auditor considers unreasonable or inappropriate.
• Projected misstatements are the auditor’s best estimate of misstatements in populations, involving the projection of misstatements identified in audit samples to the entire populations from which the samples were drawn. Guidance on the determination of projected misstatements and evaluation of the results is set out in ASA 530.[9]