Detecting Misstatements: What to Review in Audit Step 2

When considering the possibility of undetected misstatements in audit step 2, you analyze quantitative factors. This helps determine if the total misstatements found approach the materiality threshold used in your audit plan. But which misstatements should be under scrutiny at this stage?

The answer is D: Both corrected and uncorrected misstatements.

Here's why:

• Uncorrected misstatements directly impact the financial statements' accuracy and could indicate deeper issues.
• Corrected misstatements, while resolved, might signal control weaknesses or recurring errors that need attention.

By reviewing both, you gain a comprehensive view of the client's financial reporting quality and potential risks.