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Hi,
How do you determine if the matter is material and persuasive or material and not persuasive.
Thanks
The term is ‘pervasive’, not ‘persuasive’.
Pervasive means present or noticeable in every part of a thing or place. The classification between material and pervasive is one for the judgement of the audit partner. If a matter is pervasive it means that the FS are too all intents and purposes useless because the misstatement or the item where it has not been possible to collect sufficient appropriate audit evidence, is so large.
So, if an error caused profits of $100,000 to be overstated by $25,000, the error would be material, but not pervasive. If an error caused profits of $100,000 to be overstated by $150,000 (ie real result = loss of $50,000), then that would probably be pervasive.
You need to demonstrate an awareness of the two degrees of seriousness. Any judgement you make of marginal items will not be important: just discuss the options
Hello Sir ,
You have mentioned that we have to discuss the various options and this is the case in most scenarios.but the examiner says tht that the students adopt scattergun approach in giving an audit opinion and she expects from the audit student to give one off decision .can you please throw some light on it?
regardscircumstances
1 inability to obtain sufficient appropriate audit evidence2 material mistatment
if circumstance 1, is material give a qualify opinion, if material and also pervasive give a disclaimer opinion ie cannot express any opinion.if circumstance 2 is material qualify opinion ‘except for’ if not only material but also pervasive give an adverse opinion ie the report is not true and fair. you will base your opinion after calculating materiality relative to either profit etc
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