Final answer:
When reviewing the summary of misstatements found in an audit, auditors must consider the combined impact of immaterial misstatements, as well as evaluate whether misstatements from prior years are material. Auditors also consider misstatements beyond just the income statement.
Step-by-step explanation:
When reviewing the summary of misstatements found in the audit, auditors must combine individually immaterial misstatements to evaluate whether the combined amount is material. This means that even if a misstatement is considered individually immaterial, it could still be material when combined with other misstatements. The auditor's goal is to assess whether these misstatements, individually or combined, affect the overall fairness of the financial statements.
Additionally, the auditor is not required to consider the impact on the current financial statements of misstatements in the prior year that were not corrected. However, if those misstatements were material and still exist in the current year, the auditor may need to adjust the financial statements.
It's important to note that auditors do not only consider misstatements that impact the income statement. They also evaluate misstatements that impact the balance sheet, statement of cash flows, and other financial statement elements.