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CA Intermediate · Auditing and Ethics · Audit Report

CA Neha is auditing Lotus Foods Ltd, an unlisted company, for the year ended 31 March. She has been asked by the Board to decide whether to communicate Key Audit Matters (KAMs) in her report. Which statement correctly reflects the requirement under SA 701?

KAMs are mandatory for audits of listed entities' complete general purpose financial statements under SA 701, and an auditor may choose to communicate them for other entities such as unlisted companies. They are neither prohibited for unlisted companies nor restricted to modified opinions.

  1. AKAMs are mandatory for all companies audited under the Companies Act
  2. BKAMs are required for audits of complete sets of general purpose financial statements of listed entities, and the auditor may voluntarily communicate them for other entitiesCorrect
  3. CKAMs are prohibited for unlisted companies
  4. DKAMs are required only if the auditor gives a modified opinion

Explanation

SA 701 applies mandatorily to audits of complete sets of general purpose financial statements of listed entities and where the auditor otherwise decides to communicate KAMs. Hence for an unlisted company it is voluntary. It is not prohibited, and it is not linked to modification of the opinion.

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