ISA 450 Evaluation of Misstatements Identified During the Audit MCQs

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The auditor must consider the effect of misstatements on both the audit procedures performed and ultimately, if uncorrected, on the financial statements
ISA 450 Evaluation of Misstatements Identified During the Audit MCQs

ISA 450 Evaluation of Misstatements Identified During the Audit

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. Here on MCQs.club we have designed helpful Multiple-Choice Questions (MCQs) on ISA 450 revised IFAC that fully cover MCQs on ISA 450 evaluating misstatements, the summary of ISA 450, the types of misstatements with examples, ISA 450 MCQs with answers. These MCQ on SA 450 are useful for Professional Accountancy exams, Business management exams and Competitive exams.

  1. The objective of the auditor in this area, per ISA 450, is to evaluate the effect of:
    1. identified misstatements on the audit
    2. any uncorrected misstatements on the financial statements.
    3. Both A&B
    4. None
  1. 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. The above statement is correct
    2. The above statement is incorrect
  1. Which of the following examples would classify as misstatements?
    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
  1. ISA 450 requires the auditor to carry out which of the following procedures?
    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
  1. 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. True
    2. False
  1. Categories of misstatement include:
    1. Factual misstatements
    2. Judgmental misstatements
    3. Projected misstatements
    4. All of the above
  1. Factual misstatements –
    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
  1. Judgmental misstatements –
    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

  1. Projected misstatements –
    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 
  1. In order to consider the effect of misstatements on both the audit procedures performed and the financial statements as a whole the auditor must:
    1. Accumulate a record of all identified misstatements, unless they are clearly trivial.
    2. Consider if the existence of such misstatements indicates that others may exist, which, when aggregated with other misstatements, could be considered material.
    3. Report all accumulated misstatements to an appropriate level of management on a timely basis and request that all misstatements are corrected.
    4. All of the above
  1. If management have failed to correct all of the misstatements reported to them, the auditor should:
    1. Reassess materiality to determine whether it is still appropriate in the circumstances as the level of risk may be deemed higher as a result of management’s refusal.
    2. Report the uncorrected misstatements to those charged with governance and explain the effect this will have on the audit opinion.
    3. Request a written representation from those charged with governance that they believe the effects of uncorrected misstatements are immaterial.
    4. All of the above

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