It is auditor who determines whether misstatements are both material and pervasive or not using his professional judgement.

just material but not pervasive in which case the auditor will express a qualified opinion.

material and pervasive in which case auditor will give adverse or disclaimer of opinion according to the circumstances or.

That is why auditor always evaluate whether uncorrected/undetected misstatements are: This fraud be material in nature but it will hardly be pervasive whereas if the same embezzlement is discovered in relation to key personnel in the management then it is bound to have pervasive effect as many other assertions might also be misstated.Īudit has to consider both characteristics of the misstatements in order to correctly understand the implications of misstatements on the financial statements and auditor’s report. Same goes for material misstatement which is not always pervasive also. However, usually pervasive misstatement may amount to material misstatement as well.įor example, cash embezzlement by cashier is discovered.

Pervasive misstatement does not automatically means that it is material as well.

In relation to disclosures, are fundamental to users’ understanding of the financial statements.

If so confined, represent or could represent a substantial proportion of the financial statements or.

Are not confined to specific elements, accounts or items of the financial statements.

Pervasive effects on the financial statements are those that, in the auditor’s judgment: In ISA705 term Pervasive have been defined as following:Ī term used, in the context of misstatements, to describe the effects on the financial statements of misstatements or the possible effects on the financial statements of misstatements, if any, that are undetected due to an inability to obtain sufficient appropriate audit evidence.

Pervasive audit evidence meaning