material misstatement

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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
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What is risk of material misstatement?

Why do auditors concentrate their efforts on material items in the accounts?

Auditors perform audits so as to give reasonable assurance that the financial statements of the entity show a true and fair view. Financial statements of the entity are said to show a true and fair view if, after collecting sufficient and appropriate audit evidence, the auditor concludes that financial statements do not contain material misstatement.



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What is risk of material misstatement?

What is the risk of material misstatement?

The risk of material misstatement is the risk that financial statements are materially misstated prior to the audit. It is the risk that the figures and disclosure in the financial statement are not in accordance with the accounting standards and the acceptable financial reporting framework.

The risk of material misstatement consists of two components, namely inherent risk and control risk

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