# SA 450 — Evaluation of Misstatements Identified During the Audit
## Why this SA exists
As the audit proceeds, the auditor finds errors, omissions and questionable items. SA 450 sets out how to track, communicate, evaluate and document these misstatements so that a defensible opinion can be formed at the end.
## 1. Accumulation of Misstatements
- The auditor shall accumulate misstatements identified during the audit, other than those that are clearly trivial.
- Clearly trivial = items that even in aggregate are clearly inconsequential. If there is any uncertainty about whether an item is clearly trivial, it is treated as NOT clearly trivial (i.e., it must be accumulated).
### When the audit strategy/plan must be revised
The auditor reconsiders the overall strategy and plan if:
1. The nature of identified misstatements and the circumstances of their occurrence indicate that other misstatements may exist that could be material; OR
2. The aggregate of misstatements accumulated during the audit approaches materiality.
## 2. Communication and Correction of Misstatements
- The auditor shall communicate on a timely basis all accumulated misstatements to the appropriate level of management (unless prohibited by law).
- The auditor shall request management to correct those misstatements.
- If management corrects them, the auditor checks whether any misstatements still remain.
- If management refuses to correct some/all misstatements:
- Obtain an understanding of management's reasons for refusal; and
- Take that understanding into account when evaluating whether the FS as a whole are free from material misstatement.
## 3. Evaluating the Effect of Uncorrected Misstatements
Before final evaluation:
- Reassess materiality (originally determined under SA 320) to confirm it remains appropriate in light of actual financial results.
- Determine whether uncorrected misstatements are material, individually or in aggregate. Consider:
- Size and nature of the misstatements; and
- Effect of uncorrected misstatements related to prior periods (e.g., rollover/iron-curtain effects).
## 4. Communication with TCWG
The auditor communicates with Those Charged With Governance about:
- Uncorrected misstatements and their effect on the auditor's opinion; and
- The effect of uncorrected misstatements related to prior periods.
## 5. Written Representation (WR)
The auditor shall request a WR from management AND TCWG stating they believe the effects of uncorrected misstatements are immaterial. A summary of such items must be included in the WR.
## 6. Documentation
Audit documentation shall include:
1. The amount below which misstatements would be regarded as clearly trivial (the trivial threshold).
2. All misstatements accumulated during the audit and whether they have been corrected.
3. The auditor's conclusion as to whether uncorrected misstatements are material (individually or in aggregate), and the basis for that conclusion.
## Memory Hook (4 buckets)
A-C-E-C-D — Accumulate → Communicate/Correct → Evaluate uncorrected → Communicate with TCWG + WR → Document.