Justin Kealey, CPA, is auditing Tustin Companies, Inc. Kealey has accumulated known and likely misstatements for the current year to evaluate whether there is a sufficiently low risk of material misstatement of the financial statements to issue an opinion. However, Kealey notes that there are several misstatements that have been carried over from prior years.
a. Distinguish between the iron curtain and the rollover approaches to considering the misstatements from prior years.
b. Describe how SEC Staff Accounting Bulletin No. 108 requires auditors to consider misstatements carried over from prior periods.