When reviewing the summary of misstatements found in the audit,
A) an adjusting journal entry must be made by the auditor for all material misstatements.
B) auditors must combine individually immaterial misstatements to evaluate whether the combined amount is material.
C) the auditor is not required to consider the impact on the current financial statements of misstatements in the prior year that were not corrected.
D) auditors only need to consider the misstatements that impact the income statement.

Question

Quizplus · Accepted Answer

According to auditing standards, auditors must evaluate the combined effect of individually immaterial misstatements to determine whether the combined amount is material. Adjusting journal entries are only required for material misstatements. The auditor should consider the impact of misstatements on both the current and prior years' financial statements. Misstatements can impact both the income statement and the balance sheet.

When Reviewing the Summary of Misstatements Found in the Audit