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CA Intermediate · Auditing and Ethics · Audit Report

CA Rohit is auditing Himalaya Foods Ltd, a listed company. He is determining the matters to communicate as Key Audit Matters (SA 701). Which approach is correct?

The auditor selects Key Audit Matters from matters communicated with those charged with governance, taking those requiring significant auditor attention and then those of most significance in the audit. KAMs are not all management discussions, and matters causing a modification are reported in the basis for modification section instead.

  1. AChoose from matters communicated with those charged with governance those that required significant auditor attention and were of most significance in the auditCorrect
  2. BReport all matters discussed with management during the year
  3. CReport only matters that resulted in a modified opinion
  4. DReport matters on which the auditor disclaims an opinion

Explanation

SA 701 requires the auditor to determine, from the matters communicated with those charged with governance, those that required significant auditor attention, and then those of most significance in the audit. These become KAMs. Matters giving rise to a modified opinion or going concern material uncertainty are not KAMs but are reported in their own sections.

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