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4. The effect of material and pervasive misstatement on auditor's opinion a) What is a pervasive matter? (2 marks) b) Explain when misstatements of
4. The effect of material and pervasive misstatement on auditor's opinion a) What is a pervasive matter? (2 marks) b) Explain when misstatements of financial statements are deemed material but not pervasive. (3 marks) c) You are about to issue the auditor's report for the listed client Calgon Co. The financial statements show the following: Profit before tax Total assets Uncorrected misstatements: 480 5,150 (i) Due to incorrect allocation of costs, a 540 part manufacturing overheads are included in the cost of sales rather than distributed among finished goods ISA 320 recognises materiality: 12-1% revenue " 5-10% profit before tax 12% total assets. (ii) A major customer is struggling to pay 200 and no provisions have been made How do the misstatements of the company affect the auditor's opinion in both cases? (10 marks) (Total 15 marks)
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