Every error is below materiality. Does the CFO have to fix them?
The numbers are the easy part. The interview tests whether you can say them to a CFO who disagrees.
The question
Cut-off testing at Wrenhollow found that 40 of the 45 invoices, worth $0.96m, were delivered in January 2026, so FY25 revenue and profit are overstated. With two other findings, the summary is below. Overall materiality is $1.5m. The CFO doesn’t want to correct any of them.
| Overstates profit ($m) | |
|---|---|
| Revenue recognized early (40 invoices) | 0.96 |
| Inventory provision too low | 0.38 |
| Accruals missing | 0.22 |
| Total | 1.56 |
Invented data. Items under the $75k clearly trivial threshold are left out. Overall materiality $1.5m; performance materiality $750k.
- CFONone of these is material on its own. We’re not reopening the accounts for timing differences.
“What do you say to the CFO, and what goes to the audit committee?”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Add them up
What would you do here? Open the move you’d make.
Agree with the CFO: no single item reaches $1.5m.
Tempting, but it misses something. Materiality is judged on the total too: $0.96m + $0.38m + $0.22m is $1.56m, above $1.5m.
Add them up: they overstate profit by $1.56m, above $1.5m overall materiality.
The strong move. That’s the test that matters, and the arithmetic is hard to argue with.
Look for an understatement elsewhere to net the total below $1.5m.
Tempting, but it misses something. Hunting for offsets to clear a threshold is how material errors slip through. Judge the errors you found.
See how a strong candidate says it
“Each one is below $1.5m, but together they overstate profit by $1.56m, which is above overall materiality.”
Why it works: Materiality applies to misstatements in total, not only one at a time.
Step 2: Lead with the consequence and the way out
What would you do here? Open the move you’d make.
Tell the CFO that the firm requires every error to be booked.
Tempting, but it misses something. It isn’t true, and it invites a fight. What matters is the total and what it means for the opinion.
Say the total is material and puts the opinion at risk; correcting the $0.96m error brings it to $0.60m.
The strong move. It gives the consequence and the smallest fix, in numbers the CFO can check.
Offer to let it go if the CFO agrees to fix it next year.
Tempting, but it misses something. Next year doesn’t fix this year’s material overstatement, and the deal isn’t yours to make.
See how a strong candidate says it
“Left as they are, profit is overstated by a material amount, and the partner would have to consider the audit opinion. Correcting the $0.96m cut-off error alone brings the total to $0.60m.”
Why it works: The CFO needs the consequence and the smallest fix, in that order.
Step 3: Answer “it’s only timing”
What would you do here? Open the move you’d make.
Accept that it reverses in January, so it doesn’t matter.
Tempting, but it misses something. It reverses next year, but this year’s accounts, the ones lenders read, overstate profit.
Explain that it overstates this year’s profit, the figure owners and lenders read.
The strong move. It ties the error to why materiality was set on profit in the first place.
Walk the CFO through the revenue standard’s rules in detail.
Tempting, but it misses something. The CFO knows the rule. The point is the effect on this year’s numbers; keep it there.
See how a strong candidate says it
“It reverses in January, but this year’s accounts are what your owners and lenders read, and they’d show $0.96m of revenue that belongs to next year.”
Why it works: Framing the error by its effect on users answers the CFO’s objection.
Step 4: Say what goes to the audit committee
What would you do here? Open the move you’d make.
Leave it out of the audit committee report if the CFO corrects the big one.
Tempting, but it misses something. Any items left uncorrected still go to the committee, and the cut-off control gap is worth reporting either way.
Expect the partner to report uncorrected items and the cut-off control gap to the audit committee.
The strong move. Auditing standards require uncorrected misstatements to be communicated to those charged with governance, and the control gap helps them.
Email the audit committee chair yourself today.
Tempting, but it misses something. Right content, wrong route. It goes through the manager and partner, who own that relationship.
See how a strong candidate says it
“Whatever you correct, I’d expect the partner to report any uncorrected misstatements and the cut-off control gap to the audit committee.”
Why it works: Uncorrected misstatements go to those charged with governance; that isn’t the CFO’s choice.
The answer, in short
- Decision
- Ask the CFO to correct the $0.96m cut-off error; anything left uncorrected goes to the audit committee.
- Because
- Together the three errors overstate profit by $1.56m, above $1.5m materiality; correcting the cut-off error brings it to $0.60m.
- What would change it
- Evidence that control of the goods on the 40 January deliveries passed to customers before year end, which would remove the largest error.
Common traps
- Judging each error alone against materiality.
- Quoting firm policy instead of the effect.
- Accepting “it’s only timing”.
- Making deals that belong to the partner.
Check your answer
- Did I add the misstatements up?
- Did I lead with the consequence and the smallest fix?
- Did I answer the CFO’s objection with its effect on users?
- Did I say what goes to the audit committee?
Last reviewed Nov 9, 2026