Question

During the course of an audit, misstatements that are individually immaterial may be detected. What should the auditor do with these?

a. Permanently pass on these immaterial misstatements as they do not individually impact the financial statements.

b. Request that management footnote the immaterial misstatements in the financial statements for fair presentation.

c. Accumulate all of the known and projected misstatements to determine if the impact is material in the aggregate.

d. Roll them forward for three years when they will become material enough to adjust.

Answer 1

The auditor should accumulate all immaterial misstatements to determine if they are material in the aggregate and then decide if adjustments or disclosures are necessary in the financial statements for a true and fair view.

Step-by-step explanation:

During the course of an audit, if misstatements that are individually immaterial are detected, the auditor should accumulate all of the known and projected misstatements to determine if their impact is material in the aggregate. This approach corresponds to option (c). After they are accumulated, if the total misstatements are still immaterial, the auditor may continue without requesting adjustments. However, if the aggregate of these misstatements becomes material, the auditor should request that management adjust the financial statements to accurately reflect the company's financial position. This process ensures the financial statements present a true and fair view of the entity's financial state.