ISA 701 ( Key Audit Matter) Flashcards
When to include the Key Audit matter Section in report?
Key audit matter is required to be include for audit of complete set of general perpose F/s of listed entities.
Exception of Above rules:
1) If auditor express disclaimer of opinion Key audit matter section will not be included in audit report ,unless required by law.
2) Audit report of Unlisted company may also include KAM section if required by law or considered necessary by auditor (in case of public intrest entity ie banks,insurance company and pension funds)
What are the Key audit matter?
The matter that in auditor’s professional judgement were of most significant in audit of F/s of current period.Key audit mater are selected from matters communicated with TCWG.
What are the Determination the Key audit matter?
Determination of key audit matter involve three steps:
1) From matters communicated with TCWG.
2) Auditor determine which matter require significant auditor attention in performing audit.
3) Auditor which matter are most significant ,and therefore, are the Key audit matters.
What matters whih requires significant auditor attention?
- Area of high risk and significant risk eg:
1) Accounting estimates haing high etimation uncertanity (valuation of complex finnacial instrumrnt).
2) Accountin policy or change which significantly effect the F/s perticularly when not consistent with industry). - Area of significant auditor judgement.
- Area of complexity and significant management judgement.
- Area involving experts.
- Significant events or transactions that occur during period.
- Significant transaction with related party outside normal course of business.
How we communicate Key audit matter in report:
Key audit matters are described in report under heading key audit matter and under appropriate subheading for each key audit matter.
one important section weill be read from notes
What are description of individual key audit matter?
Auditor shall give the subheadin for each individual key audit matter and shall describe:
1. What is KAM ie; auditor shall briefly describe matter along wit reference to related disclosure in F/s.
2. Why matters are considered most significant in audit.
3. How matters was adressed in audit ie;
* Brief overview of procedure pweformed.
* Indication of outcome of auditors procedures.
* Key observation with respect to metter.
* ASpects of auditor response relevent to matter.
What are the placement of KAM section?
To make it prominent should be placed closely to auditors opinion.
What are the order of KAM within KAM section?
Order of presentation depends on professional judgement:
1) In order of relative importance.
2) In order in which matters are disclosed in F/s ( disclosures).
