Keeping the uncorrected misstatements summary
How to keep an ISA 450 summary of uncorrected misstatements as your own working paper, compare it with materiality and attach it to representations.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
At the end of most audits there is a short list of errors the client chose not to fix: an accrual a little too low, a provision the team thinks is generous, a projected error from a sample. None of them is large. Together they may be, and the engagement partner has to know the answer before approving the auditor's report.
That list is the summary of uncorrected misstatements. It is one of the few completion documents an inspector will always ask for, and on many files it is assembled in a hurry from memory the day before sign-off. In Achekam there is a further reason to plan it deliberately: the completion screen's own summary does not fill itself in, so the team has to keep it.
What the summary is for under ISA 450
ISA 450 asks the auditor to accumulate every misstatement found during the audit, other than those that are clearly trivial, and to ask management to correct them. For what management will not correct, the auditor must understand why, then decide whether the uncorrected items are material, alone or in aggregate, taking account of their size, their nature and the circumstances in which they arose. The effect of uncorrected items from prior periods is part of that judgement.
The summary is how that evaluation is shown. It also has two audiences outside the file: those charged with governance, to whom uncorrected misstatements are communicated, and management, who confirm in writing that they consider the effects immaterial. ACCA's article on the evaluation of misstatements explains ISA 450 and the effect of uncorrected misstatements, with worked examples that are worth working through with a new senior.
It helps to label each item by type:
- Factual: no doubt about the error, such as an invoice posted twice.
- Judgemental: a difference in an estimate or a policy choice the team considers unreasonable.
- Projected: the team's best estimate of the error in a population, extrapolated from a sample.
Why Achekam's completion summary stays empty
Achekam's completion stage has a Summary of Uncorrected Misstatements, and today it stays empty. It reads from a misstatement register that no screen or route writes to. The server code to record or project a misstatement exists, but nothing calls it, so no amount of work on the file will populate that summary.
This is a known gap, not a setting to find. Do not leave the completion summary blank and assume the evaluation is elsewhere; build it as a working paper of your own, as described below, and reference it from the completion paper.
Keeping the misstatements in a workbook on the paper
What Achekam does record is the raw material. Staff record an audit adjustment on a lead schedule line with a reason, and raise findings from a working paper that are later closed or withdrawn. Lead schedules are built from the engagement's trial balance, so every adjusted line can be traced to its accounts. The summary draws those threads together.
Create a completion working paper for misstatements and attach a workbook to it. A working paper can have a spreadsheet workbook whose figures refresh from the engagement's trial balance, with any figure the refresh could not read listed. A practical layout has one row per misstatement and these columns:
- Reference to the finding and to the lead schedule adjustment.
- Description in a sentence a director would understand.
- Type: factual, judgemental or projected.
- Debit and credit accounts.
- Effect on profit before tax.
- Effect on net assets, and on current and non-current classification.
- Corrected by the client, or not, and the date that was confirmed.
Keep corrected items on the schedule with their status. A reviewer wants to see everything found, not only what is left, and the pattern of corrected items says something about the client's controls.
Comparing totals with materiality
Total the uncorrected items by effect, then compare them with the materiality the engagement partner approved. In Achekam, staff propose overall, performance and clearly-trivial materiality from a benchmark with a written rationale, the engagement partner approves it, and Achekam suggests no percentage. If materiality was revised during the audit, the latest approval replaces the earlier one, which is kept; compare with the figure in force, and say on the paper which one that is.
Then look past the totals. A small misstatement can be material by nature: one that turns a loss into a profit, breaches a loan covenant, affects directors' remuneration or hides an illegal act. Record the qualitative assessment in words alongside the arithmetic.
A worked example in words: the team finds a stocktake cut-off error the client corrects, an unaccrued legal fee the client declines to post, and a projected error in receivables from the sample. The uncorrected total is below overall materiality but close to it, and the legal fee relates to a claim the bank does not yet know about. The partner concludes the items are not material in aggregate but asks for the legal fee to be raised with the board, and the paper records both judgements.
If the conclusion goes the other way, the opinion changes. Achekam drafts the auditor's report on standard ISA 700, 705, 706 and 701 wording, refuses approval while any bracketed placeholder remains, and lets only the engagement partner approve. How to move from a material uncorrected misstatement to a qualified or adverse opinion is covered in modified audit opinions, and how the starting materiality is chosen in choosing a materiality benchmark.
Representations about uncorrected items
ISA 450 asks for a written representation that management and, where appropriate, those charged with governance believe the effects of the uncorrected misstatements are immaterial, with the summary included in or attached to the representation. Attach the schedule from your working paper to the representation letter, so the signatories see exactly the items they are confirming.
The letter can then go out for e-signature from Achekam. Staff prepare the document, add signers, approvers and copied recipients in order, and each signer signs from an e-mailed link without needing an Achekam account. Put the person who will sign on behalf of the board last in the order, after any finance director who should check the schedule first.
One habit to adopt
Open the misstatements paper on the first day of fieldwork, not the last. Every time someone records an adjustment on a lead schedule, they add a row to the workbook. At completion the summary is already there, the totals already compared, and the partner's evaluation can start from evidence rather than recollection.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
