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Any one who can advise me the difference between the two, what items will have pervasive effect by nature, should all the financial statements be affected by the misstatement/limit of scope to be considered as pervasive. For me when there is a material mistatement in inventory, many items will be affected, cost of goods sold, profit/loss, then equity…so pervasive. but in many examples misstatements in inventory are considered only as “Except for”…..
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hello,
based on my understanding, pervasiveness is not determined by single material misstament. it is considered pervasive when the misstatement result to the whole FS is pervaded and could not be relied upon. u can refer to article – “a matter of opinion” issue 09/2010. however for exam purpose, u can just make assumption that if the item is pervasive, an adverse or disclaimer of opinion will be issued. if there is unlikely that an adverse opinion is necessary, then a qualified ‘except for’ opinion would appear more appropriate. pls correct me if im wrongthank you for your clarification hajamuslim. FYI a single material misstatement can be considered as pervasive if it constitutes a significant part of the group asset, group revenue or profit. for instance if a subsidiary asset that is 80% of the gruop net asset is materially misstated, it is pervasive.
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I agree with temesgen that a single transaction can be pervasive in an entity.
If a balance is going to change a profit to significant loss
If an event will move a client to insolvency/cashflow issue/going concernIn a group…
Just think of enron and assume the loss making subs is one.May be wrong pls advice if so
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