An auditor is documenting the results of an audit of a nonissuer. The auditor has identified a significant finding related to a material misstatement that was corrected by management. Regarding the documentation of this finding, which of the following is required by AU-C 230?

Answer options:

The auditor need not document the misstatement since it was corrected and the final statements are accurate.

The auditor must document the nature of the misstatement, the amount, and the conclusion that it was corrected.

The auditor must include a copy of the original journal entry and the correcting entry in the permanent file.

The auditor must document the discussion with the internal audit function regarding the error.

How to approach this question

Recall the 'experienced auditor' standard in AU-C 230 Audit Documentation.

Full Answer

B.The auditor must document the nature of the misstatement, the amount, and the conclusion that it was corrected.✓ Correct

AU-C 230 requires the auditor to document significant findings or issues, actions taken to address them (including corrections), and the basis for conclusions. A material misstatement is a significant finding. The fact that it was corrected does not remove the documentation requirement; the auditor must document the audit trail.

Common mistakes

Believing that corrected errors don't need documentation because the final numbers are right.

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