Dealing with MISSTATEMENTS discovered during the audit - ASA/ISA 450

ASA450 doesn't get referred to a lot, but it is a critical component of the audit process - it guides auditors on what to do about the MISSTATEMENTS they uncover while collecting audit evidence.
My ultimate audit video study guide is available here
amandalovestoaudit.com/learni...
If you have questions about ASA/ISA 450, add them in the comments below.
Find ASA 450 here www.auasb.gov.au/Pronouncement...
#StandardsExplained #SignificantRisk #Outsourcing #ISA402 #ASA402 #ILoveAudit #Auditing
Subscribe to watch more auditing videos!
/ amandalovestoaudit
Catch me on social media!
/ amandalovestoaudit
/ amandasaudit
/ amandalovestoaudit
Mic - Rode SmartLav+
Explain Everything iPad app
LumaFusion iPad app

[@thapelomosadi7156]

thank you Amanda... you are my BAE( Best Auditor Ever)

[@amandalovestoaudit]

Thanks Thapelo!

[@ZWGleeson]

Great little summary here Amanda!

[@amandalovestoaudit]

Thanks Zac!

[@tobyskatefilms7262]

Oh love the new titles and stuff!

[@tobyskatefilms7262]

Why am i watching this? I have absolutely no reason to be watching anything audit related. HA!

[@amandalovestoaudit]

Thanks and love that you’re still watching even though you aren’t in the field any more 😊
Audit concepts like risk and internal controls appear in every industry/job 😊

[@suomanuunyango92]

You are God sent.

[@mimiyak5972]

hello, thanks for the video. What if the misstatement is undetermined in amount but you know its material will that affect the opinion?

[@khethiwentlekeni5103]

Thanks Amanda for these videos, they are incredibly helpful. A $50k understatement (previous year) and $80k overstatement in the current year, same account, materiality being $100k, do you consider $130k i.e. amount regardless of the sign or you consider a $30 overstatement, being the net of the 2 amounts?

[@amandalovestoaudit]

Yes - I'd look at the entire swing - $130k

[@kanhiyasinha3187]

Love ❤️ from India

[@jamil1840]

Hi Miss.
In para 6 (b). Is he talking about immaterial misstatements accumulated and considering when it approaches materiality?

[@amandalovestoaudit]

Hi Mystic - sorry for the delay in replying. Yes - you’ll keep track of immaterial issues in case they show a pattern or cumulate to something that is material. It could be a pattern of small misstatements to hide fraud or a systematic error (which then when extrapolated could become a big issue)

[@Qomar2543]

Thanks Amanda... Question: Assume overall materiality for the financial statements as a whole is set as $ 100,000, performance materiality set as $ 50,000. If the auditor finds misstatement in fixed assets account of 55,000. Do we have to modify the audit opinion?

[@amandalovestoaudit]

Hi Wulan - what do you think? Is the performance materiality for that part of the accounts? Often performance materiality is set based on specific account classes

[@ahss6275]

Hello Amanda,
I love these types of videos by you and find them quite informative. However, I can’t seem to be able to locate them in an orderly or systematic order. For example, chapter of 1-7 in order or in order of subject topics etc.
I hope you can help. 🙏

[@amandalovestoaudit]

Hi Azzam - are you looking at the entire playlist of standards videos?
This is it here
Auditing Standards EXPLAINED
ua-cam.com/play/PLpJRVR3iB5Z7ST2Lc9SYeHHUznmlkVhqe.html

[@ahss6275]

AmandaLovesToAudit
Thank you Amanda. The link you provided is helpful regarding Standards. What about your other lectures on auditing. Are they systematically filed somewhere? Or is it an inherent problem of UA-cam filing system? 🙏

[@amandalovestoaudit]

If you go to the main page of my channel, the 4th playlist down is one titled "Amanda's lectures" - ua-cam.com/play/PLpJRVR3iB5Z6RtwAoqHcOECY2_NdMegHM.html

[@boikanyolekwane6870]

Hi. When answering a theory question how do I identify that an amount is qualitatively material? I tend to miss it.

[@amandalovestoaudit]

Hi Boikanyo!
Remember that qualitative means non-financial - so it may be an item that isn’t big in terms of $$, but important because it is an area that could be of major importance to shareholders. Eg most fraud is qualitatively material, even if not quantitative. This means you need to know the company/client well. Eg management bonus payments - the misstatement might not be $ big, but shareholders would be interested anyway.
Hope this helps! 😊

[@mu3824]

Hi Amanda. I'm watching your channel from Canada and like your clear explanations.
I'd like to ask you a question on likely misstatements (also referred to as "projected misstatements").
Example: Out of a population of $500,000, a sample of $75,000 has been selected. A total of $15,000 misstatements were found in the sample.
In this case:
Identified misstatements = $15,000
Projected misstatements = ($15,000 / $75,000) x $500,000 = $100,000
Question: Is the likely misstatement $100,000? Or is it $85,000 ($100,000 - $15,000)?
My textbook mentions comparing materiality with the sum of identified misstatements and likely misstatements, which makes me confused. In the above example, I thought that $100,000 is the likely misstatement and that it already includes the $15,000 identified misstatements. However, if I follow the logic of the textbook wording, the sum of identified misstatements ($15,000) and likely misstatements ($100,000) would be $115,000. I am getting confused.
Thank you!

[@amandalovestoaudit]

Hi! The Likely Misstatement of $100k includes identified misstatements of $15k

[@mu3824]

@@amandalovestoaudit Hi Amanda. Thanks so much for your reply. Have a great day!