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Hello
1) what is the impact on auditors report when immeterial items are material in aggregate?
2) what is the impact on auditors report when material items Dr and Cr offset each other? And becomes immaterial in aggregate.
Thank you.
See page 43 of the notes also.
1) Request management correct all factual errors to bring the aggregate below the threshold – if left with misstatements that are, in the auditor’s judgement, material – let’s say they all impact profit, the audit opinion must be qualified.
2) If individually material they should be dealt with (i.e. if not adjusted, a qualified opinion) – that their impact is offset (say in profit) would not be a reason to simply ignore them. Say trade payables are factually overstated and a bank overdraft are understated by the same material amount – these are separate line items in the financial statements. Even though this has no effect on profit or indeed on total liabilities, trade payables are unsecured whereas the bank o/d is secured. To the user of the financial statements this is material as it would affect gearing (if a “permanent” overdraft is included in debt) and presumably covenants (otherwise why want such a factual error to be in the financial statements).
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Thank you so much for your explanation 🙂
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