Key audit matters in the auditor’s report – Part II
In accordance with our?previous blog, we’ll go through some more critical topics relating to the Key Audit Matters in this one.?
Key Audit Matters Not a Substitute for Expressing a Modified Opinion:
The auditor shouldn’t communicate the matter in the Key Audit Matters section of the auditor’s report when the auditor would be required to modify the opinion as per SA 705 (Revised) as a result of the matter.
Descriptions of Individual Key Audit Matters:
The descriptions of each of the key audit matters in the Key Audit Matters areas of the report should have reference to related disclosures if any, in financial statements and should address:
Circumstances where a Matter determined as a Key Audit Matter isn’t part of the communication:
The auditor should describe each key audit matter in the auditor’s report unless either of the following applies:
Form and Content of the Key Audit Matters Section in Other Circumstances:
In case the auditor considers, based on the circumstances and facts of the audit and entity, that there aren’t key audit matters for communicating, the auditor should provide a statement separately in a section to this effect in the auditor’s report under the heading “Key Audit Matters”.
Placement of Key Audit Matters
Generally, the Key audit matters section is required to be placed after the Basis for opinion paragraph and before the Management responsibility paragraph. In case, the ‘Material uncertainty relating to going concerned’ section is required as per revised SA 570, then the Key Audit Matter section is placed after that section. When a Key Audit Matters section is presented in the auditor’s report, an Emphasis of Matter paragraph may be presented either directly before or after the Key Audit Matters section, based on the auditor’s judgment as to the relative significance of the information included in the Emphasis of Matter paragraph.
Communication with Those Charged with Governance
The auditor shall communicate with those charged with governance:
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Potential examples of Key Audit Matters?
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The interplay between EOM and KAM
When SA 701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a description of individual key audit matters. In other words, when a matter has been determined to be a key audit matter, the auditor is required to include the matter in the auditor’s report by SA 701. The auditor should not use an Emphasis of matter paragraph or another matter paragraph to highlight the matter instead of the requirements in SA 701 and an Emphasis of matter paragraph or the other matter paragraph cannot be used as a substitute for reporting the matter as a key audit matter.
Documentation
The auditor shall include in the audit documentation:
The rationale for the auditor’s determination not to communicate in the auditor’s report is a matter determined to be a key audit matter.
This content is meant for information only and should not be considered as an advice or legal?opinion, or otherwise.?AKGVG & Associates?does not intend to advertise its services through this.
Posted by:
CA Ankur Vajpayee
AKGVG & Associates