ISA 450 Evaluation of Misstatements Identified During the Audit MCQs

1. The objective of the auditor in this area, per ISA 450, is to evaluate the effect of:

1. 1. identified misstatements on the audit
   2. any uncorrected misstatements on the financial statements.
   3. Both A&B
   4. None

2. What is a misstatement?

‘A difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework.

1. 1. The above statement is correct
   2. The above statement is incorrect

3. Which of the following examples would classify as misstatements?

1. 1. Misclassification of an item of assets or liabilities (e.g. current vs non-current distinction)
   2. Omission of a disclosure required by IFRS 5 or IFRS 7
   3. Application of an accounting policy for revenue which contradicts the requirements of IAS 18 / IFRS 15
   4. All of the above

4. ISA 450 requires the auditor to carry out which of the following procedures?

1. 1. Communicate all misstatements found during the audit to an appropriate level of management and request that the misstatements be corrected.
   2. Request a written representation from management as to whether they believe the effect of uncorrected misstatements are immaterial, individually, or in total
   3. Prior to evaluating the effect of uncorrected misstatements re-assess materiality per ISA 320.
   4. All of the above

5. The auditor must consider the effect of misstatements on both the audit procedures performed and ultimately, if uncorrected, on the financial statements as a whole.

1. 1. True
   2. False

6. Categories of misstatement include:

1. 1. Factual misstatements
   2. Judgmental misstatements
   3. Projected misstatements
   4. All of the above

6. Factual misstatements –

1. 1. a misstatement about which there is no doubt.
   2. a difference in an accounting estimate that the auditor considers unreasonable, or the selection or application of accounting policies that the auditor considers inappropriate.
   3. is the auditor’s best estimate of the total misstatement in a population through the projection of misstatements identified in a sample.
   4. None

7. Judgmental misstatements –

1. 1. a misstatement about which there is no doubt.
   2. a difference in an accounting estimate that the auditor considers unreasonable, or the selection or application of accounting policies that the auditor considers inappropriate.
   3. is the auditor’s best estimate of the total misstatement in a population through the projection of misstatements identified in a sample.
   4. None