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What is meant by pervasive effect on the financial statement?

The pervasive effect is the term used to describe the effect of misstatement on the financial statement or the possible effect thereon if any misstatement remains undetected due to auditor’s inability to obtain sufficient and appropriate audit evidence.

Pervasive effects on the financial statement are those that in the auditor’s judgement:

  • Are not confined to specific elements, account or item of financial statements;
  • If so confined, represent or could represent a substantial proportion of the financial statement;
  • In relation to disclosure, they are fundamental to the user’s understanding of the financial statement.

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