SA 701 deals with the responsibilities of an auditor to communicate the key audit matters in his/her audit report. Show IntroductionSA 701 is intended for addressing both the judgment of an auditor as to what is required to be communicated in his/her audit report and the content and form of such communication. The purpose of communicating key audit matters is:
Communicating the key audit matters in the report of the auditor is with respect to an auditor having formed his/her opinion on financial statements overall. However, communicating the key audit matters in auditor’s report is:
Determining Key Audit MattersThe auditor should determine, from matters communicated with the person(s) charged with governance, those matters which mandated significant attention of the auditor in executing the audit. While determining this, the auditor should take into consideration the followings:
The auditor should conclude which of the matters determined as per the aforesaid criteria are the most significant ones in the audit of financial statements of the relevant period and therefore are key audit matters. Communicating Key Audit MattersAn auditor should describe each of the key audit matter, with the help of a suitable subheading, in the separate section of his/her audit report under “Key Audit Matters”. A. Key Audit Matters aren’t a substitute to express a modified opinion An auditor shouldn’t communicate the matter in Key Audit Matters part of his/her report when he/she would require modifying the opinion as per SA 705 (Revised) as an end result of the matter. B. Descriptions of Individual Key Audit Matters The descriptions of each of the key audit matter in Key Audit Matters areas of the report should have reference to related disclosures (if any), in financial statements and should address:
C. Circumstances where a Matter determined as a Key Audit Matter isn’t part of the communication: An auditor should describe each of the key audit matter in his/her report unless:
D. 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 his/her report under “Key Audit Matters”. Communication with Person(s) Charged with GovernanceAn auditor should communicate with the person(s) charged with governance:
DocumentationAn auditor should include in his/her audit documentation:
File your returns in just 3 minutes 100% pre-fill. No manual data entry Is key audit matters mandatory?SA 701 prescribes no threshold on number of key audit matters that needs to be communicated by auditor. Generally, Key audit matters section is required to be placed after the Basis for opinion paragraph and before the Management responsibility paragraph.
What should be included in key audit matter?Key audit matters— Those matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements of the current period. Key audit matters are selected from matters communicated with those charged with governance.
Who is required to disclose key audit matters?The objectives of the auditor are to determine key audit matters and, having formed an opinion on the financial statements, communicate those matters by describing them in the auditor's report. 8.
What are the 3 main types of audits?There are three main types of audits: external audits, internal audits, and Internal Revenue Service (IRS) audits. External audits are commonly performed by Certified Public Accounting (CPA) firms and result in an auditor's opinion which is included in the audit report.
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