What is a material misstatement?
Material misstatements represents the financial statements presented by a client that are not in conformity with Generally Accepted Accounting Principles, in all material respects and indicate the auditor’s belief that the financial statements, taken as a whole, are materially misstated.
Misstatements can result from errors or fraud and may consist of any of the following:
1) An inaccuracy in gathering or processing data from which financial statements are prepared.
2) A difference between the amount, classification, or presentation of a reported financial statement element, account, or item and the amount, classification, or presentation that would have been reported under generally accepted accounting principles.
3) The omission of a financial statement element, account, or item.
4) A financial statement disclosure that is not presented in conformity with generally accepted accounting principles.
5) The omission of information required to be disclosed in conformity with generally accepted accounting principles.
6) An incorrect accounting estimate arising, for example, from an oversight or misinterpretation of facts; and
7) Management’s judgments concerning an accounting estimate or the selection or application of accounting policies that the auditor may consider unreasonable or inappropriate.
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