CA Intermediate · Auditing and Ethics · Audit Report
In the audit of Narmada Foods Ltd, a listed company, the auditor has identified a complex valuation of biological assets as the matter that required most significant attention. The auditor is finalising the report with an unmodified opinion. Under SA 701, where should the Key Audit Matters be communicated and how?
Key Audit Matters must be communicated in a separate section titled 'Key Audit Matters' in the auditor's report, explaining why the matter was significant and how it was addressed. It does not replace a modified opinion or an Emphasis of Matter paragraph.
- AIn a separate section titled 'Key Audit Matters', and the matter is not a substitute for a modified opinionCorrect
- BInside the Emphasis of Matter paragraph only
- CIn the Report on Other Legal and Regulatory Requirements
- DIn the management representation letter only
Explanation
SA 701 requires a separate 'Key Audit Matters' section describing why each matter was significant and how it was addressed. Communicating KAMs is not a substitute for a modified opinion where one is required, nor for the Emphasis of Matter. Hence the other places are incorrect.
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