In this topic 8 sections
- 75Bring the individual findings together
- 76Identify what is wrong, including disclosures
- 77Keep clearly trivial separate from immaterial
- 78Revisit materiality using the actual results
- 79Assess size, nature and the combined effect
- 80Correct findings and investigate their cause
- 81Decide whether the evidence is enough
- 82Sources and further reading
Bring the individual findings together
Completing every planned procedure does not automatically establish that the audit objective has been achieved. Evidence may reveal a problem that the plan did not anticipate. A control failure, unusual journal entry and incomplete disclosure might have been investigated by different team members; considered together, they may point to a wider issue.
The final assessment connects findings to the financial statements and to the assessed risks. Consider evidence that contradicts management's assertions as well as evidence that supports them. Decide whether further work, revised risk assessments or a different audit response is necessary. Reasonable assurance concerns reducing audit risk to an acceptably low level; performing audit tests does not remove the underlying entity's inherent and control risks.
Concept sources: ASA 330, paragraphs 25–27 and A62–A64; ASA 200, December 2022, paragraphs 13 and 17 — the evidence conclusion and audit-risk distinction.
Identify what is wrong, including disclosures
A misstatement can arise from a wrong amount, an omitted transaction, an unreasonable estimate or an inappropriate classification or disclosure. The issue is the difference between the reported information and what the reporting framework requires. A financial statement can be misleading even where its arithmetic is correct.
| Finding type | Meaning | Original example |
|---|---|---|
| Factual | The error can be established without a disputed estimation judgement. | A supplier invoice is entered twice. |
| Judgemental | The auditor considers management's estimate or accounting-policy application unreasonable. | Evidence of deteriorating customer solvency is omitted from a credit-loss assessment. |
| Projected | Results from tested items are used to estimate misstatement in the sampled population. | A representative expense sample indicates a wider amount of incorrectly recorded costs. |
Concept sources: ASA 450, May 2017 compilation, paragraph A6 — classification; examples are newly written.
Do not confuse projection with a proven error in every untested item. Equally, an estimation disagreement is not dismissed simply because judgement is involved. Establish what the reporting framework permits, evaluate the supporting evidence and explain why the recorded amount or disclosure is or is not reasonable.
Keep clearly trivial separate from immaterial
Accumulate identified misstatements unless they are clearly trivial. That means plainly inconsequential in size, nature and circumstances, individually and collectively. It is a much narrower exception than “below overall materiality”. If unsure whether an item qualifies, accumulate it.
Keep a schedule that records the affected accounts or disclosures, amount or qualitative effect, cause, evidence reference and whether management corrected it. Retain the basis for the clearly-trivial threshold and the final assessment. A small intentional manipulation or omitted sensitive disclosure may need attention regardless of its monetary size.
Concept sources: ASA 450, paragraphs 5 and 15, A2–A6 — accumulation and documentation.
Revisit materiality using the actual results
Planning materiality may have used forecast results. Before concluding on uncorrected misstatements, reassess whether that amount remains suitable in light of the actual results and users' needs. A reduced benchmark may require lower materiality, a reconsideration of performance materiality and more work. Performance materiality helps plan procedures; it is not an automatic final pass/fail threshold for the statements.
Concept sources: ASA 320, December 2023, paragraphs 12–14 — revision and resulting changes to procedures; original arithmetic illustration.
Assess size, nature and the combined effect
| Review question | Why it matters |
|---|---|
| Does the item affect a sensitive measure? | A small adjustment might change a profit into a loss or affect a covenant. |
| Do several errors point in the same direction? | Their combined effect may matter even where each is modest. |
| Are different accounts or disclosures involved? | Netting unlike errors may hide a material classification or disclosure problem. |
| Does an earlier-period error still affect this year? | Carry-forward effects can distort present balances and performance. |
| Is there evidence of bias or deliberate manipulation? | Small findings can change the assessment of management and other evidence. |
Concept sources: ASA 450, paragraphs 10–13 and A16–A25 — qualitative, aggregate and prior-period evaluation; original review questions.
Correct findings and investigate their cause
Discuss accumulated misstatements promptly with the appropriate management level and request correction, unless communication is prohibited. If management refuses, understand and assess its reasons. A correction does not establish that the problem was isolated: investigate whether the same process caused other errors, and perform appropriate follow-up on management's correction exercise.
Communicate remaining misstatements and potential reporting effects to governance, identifying material items individually and considering prior-period effects. Request a written representation from management, and governance where appropriate, about whether they believe the uncorrected effects are immaterial individually and in aggregate, with the summary attached or included. A representation records management's position; it does not turn weak evidence into a sufficient basis for the opinion.
Concept sources: ASA 450, paragraphs 6–14 — reconsideration, correction and communication.
Decide whether the evidence is enough
Ask whether the evidence addresses each relevant assertion, whether its sources and methods are credible, and whether findings from different procedures fit together. Consider the quality and persuasiveness of the information, previous experience, management's response and indicators of fraud or error. Unsupported management explanations and the absence of obvious exceptions are not equivalent to positive evidence.
For estimates, assess the methods, assumptions, data and disclosures against the framework, including indications of management bias. If findings challenge the estimate or evidence remains inadequate, discuss the issue and obtain further evidence or revise the response. The auditor must be able to explain why the estimate is reasonable or misstated, rather than merely noting that management prepared a model.
Concept sources: ASA 540, December 2022, paragraphs 31–36 — bias and the overall evaluation of estimates; ASA 330, A64 — evidence evaluation factors.
- Combine findings
- Reassess risks and materiality
- Obtain corrections and follow up unresolved matters
- Evaluate all remaining evidence and misstatements
- Decide whether more work or a reporting consequence is needed
Evidence may be persuasive without being conclusive. The objective remains high, rather than absolute, assurance. Analytics that examines every recorded item does not change this: source-data omissions, unsuitable tests and interpretation errors can remain. Where necessary evidence cannot be obtained, consider the resulting opinion implications; do not issue an unsupported conclusion because the budget or timetable has run out. Detailed reporting decisions are developed in the next module.
Concept sources: ASA 200, paragraphs 5, 17 and A47–A55; ASA 330, paragraph 27 — evidence limitations and the need to respond.
Sources and further reading
- ASA 450, May 2017 — accumulated and uncorrected misstatements.
- ASA 320, December 2023 — revising materiality.
- ASA 330, December 2021 — concluding on the evidence.
- ASA 540, December 2022 — evaluating accounting estimates.
- ASA 200, December 2022 — reasonable assurance and audit risk.