What is true regarding the discovery of an insignificant error in an audit report?

The assertion that reporting may be formal or informal depending on the nature of the error is accurate. In audit practice, the significance of an error typically dictates how it should be reported. Insignificant errors might not warrant a formal report; instead, these can often be communicated informally, for instance, through a discussion with relevant stakeholders or included in an informal summary. This approach helps ensure that resources are allocated efficiently, allowing auditors to focus on more material issues that could have a larger impact on the financial statements or internal controls.

This flexibility in reporting reflects an understanding that not all errors carry the same weight and that the context of the findings plays a crucial role in determining the appropriate reporting method. For minor mistakes, an informal communication might suffice to inform management without unnecessarily complicating the audit process or overwhelming stakeholders with immaterial details.