In short
A misstatement or possible misstatement is pervasive if its effects aren't confined to specific elements of the financial statements, are confined but are a substantial part of them, or relate to disclosures fundamental to users' understanding.
Key takeaways
- A material but not pervasive misstatement leads to a qualified opinion; a pervasive one to an adverse opinion.
- A material but not pervasive scope limitation leads to a qualified opinion; a pervasive one to a disclaimer.
- Pervasiveness is a matter of the auditor's professional judgment.
Where it's tested
AUD: Audit Reports — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
The financial statements contain a material misstatement that is NOT pervasive. The auditor should issue: