MCQ 4 — SA 450 × SA 530 The audit team found an error.

MCQ 4 — SA 450 × SA 530

The audit team found an error. Management says it does not need to be accumulated. Is management right?

During the audit of Nova Ltd., the auditor establishes that amounts below ₹75,000 are considered “clearly trivial” for purposes of accumulating misstatements.

During substantive testing, the auditor identifies the following misstatements:

Item A - 60,000
Item B- 70,000
Item C- 80,000
Item D- 1,20,000

Management agrees to correct Items C and D but refuses to correct A and B, stating:

“A and B are individually below ₹75,000 and therefore are not required to be accumulated under SA 450.”

The audit senior agrees with management.

Which ONE of the following is correct?

A. The senior is correct because the clearly-trivial threshold is applied separately to each individual misstatement, and therefore both A and B can be excluded from accumulation even if their combined amount becomes significant.

B. The senior is incorrect because SA 450 requires all identified misstatements below materiality to be accumulated, and the concept of “clearly trivial” is relevant only when deciding whether management should correct an identified misstatement after the financial statements have been finalised.

C. The senior is correct only if management also confirms that the nature of Items A and B is qualitatively insignificant; otherwise, the auditor must accumulate them even though each is individually below the threshold.

D. The senior’s conclusion is not necessarily sustainable because the auditor should consider whether the threshold has been appropriately determined and should accumulate identified misstatements other than those that are clearly trivial; if A and B are genuinely within the defined clearly-trivial range, they need not be accumulated merely because their aggregate exceeds ₹75,000.