Annual Audit Manual
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8036 Material misstatements in the financial statements or the need to update our understanding of the entity and its environment
Apr-2018
In This Section
CAS Requirement
If, as a result of performing the procedures in paragraphs 14‑15, the auditor concludes that a material misstatement in the financial statements exists or the auditor’s understanding of the entity and its environment needs to be updated, the auditor shall respond appropriately in accordance with the other CASs (CAS 720.20).
CAS Guidance
In reading the other information, the auditor may become aware of new information that has implications for (CAS 720.A51):
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The auditor’s understanding of the entity and its environment, the financial reporting framework and the entity’s system of internal control and, accordingly, may indicate the need to revise the auditor’s risk assessment.
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The auditor’s responsibility to evaluate the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial statements.
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The auditor’s responsibilities relating to subsequent events.
OAG Guidance
If we determine that a material misstatement in the financial statements exists, apply guidance in OAG Audit 9010 on evaluating misstatements, including consideration of any potential indication that internal controls may not be effective. When we identify a material misstatement in the financial statements after the date of the auditor’s report, follow the guidance in OAG Audit 9040 on evaluating subsequent events and document procedures in accordance with guidance in OAG Audit 1173 on documenting matters arising after the date of the auditor’s report.
If we determine that our understanding of the entity and its environment needs to be updated, consider the impact on our audit strategy and responses to the assessed risks, e.g., if our risk assessment for a particular FSLI needs to be updated, this may require additional procedures to be performed over that FSLI. Any updates necessary to our audit documentation would need to be reflected on the audit file. If the changes need to be made after the date of the auditor’s report, document them in accordance with OAG Audit 1173.
If we become aware of material misstatements after the financial statements were issued, consult with Audit Services.