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Mike, can you explain me the difference between when examiner says ‘explain the matters that should be considered’ and when states ‘evaluate the risks of material mistatement’. What is the fundamental difference when answering these 2 requirements.
Thanks.
“Explain” involves telling someone why a thing exists or how a thing works. It’s an explanation.
“Evaluate” literally means “put a value on something” so you have to consider the good things about the matter and compare them / measure them against the bad things. In an “evaluate” question, it seems reasonable to expect you to give a conclusion / recommendation whereas an “explain” question is simply asking you to tell your virtual grand-mother in words she is likely to understand why / how / what the position is
Not referring to the verbs Mike it is about what fundamental difference will be when answering fr a question asking matters to be considered and risks of material mistatement. Are these both requirements same and shall be answered alike.
“What is the fundamental difference ” sounds to me like you’re asking about the verbs!
Ok, my misinterpretation.
The “Explain” one is asking for all sorts of matters – legal, professional, ethical, financial, practical, material ….
Whereas the “Evaluate” one is asking you specifically to establish (and “quantify” the risk of material misstatement of the actual figures within the financial statements
I guess i chose the wrong words to ask my query 😀
Still a little confusion Mike as the matters we have considered is because they are potentially risks of material misstatement apart from the ethical matters. Also, what you meant by quantifying risk of material misstatement ? If can elaborate a little more will be great.
Thanks Mike 🙂
Well, this is a real problem! These examiners ask you to “evaluate” and the verb to evaluate involves putting a value upon something. That itself implies quantification. But I cannot for the life of me imagine students sitting in an exam room trying to put a value upon some breakdown of internal control or risk of material misstatement and concluding (on that one point) that the breakdown is worth $X,XXX
I’m not sure that you would be correct to ignore in a “matters to consider” question the considerations beyond the obvious material misstatement risk elements. Are you sure that the suggested solutions ignore these ancillary points?
Yes, matters to consider include a wide range of issues like ethical, commercial and business implications and guess that is all the difference between both the requirements.
Thanks Mike.
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