Final answer:
Auditors accumulate known, projected, and potential misstatements in evaluating financial statement accuracy. This comprehensive approach ensures the reliability of the audit conclusion and determines if any adjustments are necessary.
Step-by-step explanation:
In evaluating whether there is a sufficiently low probability of material misstatement in the financial statements, the auditors accumulate known, projected, and potential misstatements in the financial statements. Accumulating this information allows auditors to assess whether the financial statements as a whole present a true and fair view of the financial position of the entity. This includes identifiable misstatements based on actual data (known misstatements), extrapolations from audit samples (projected misstatements), and other estimated misstatements that arise from differences in judgments or the use of different methodologies that are less certain than known or projected misstatements (potential misstatements). Collectively, these help auditors to determine if adjustments are needed, or if further audit evidence should be sought to conclude the audit with reasonable assurance.