CA Intermediate · Auditing and Ethics · Audit Report
In the audit of Vihaan Engineering Ltd, a listed company, the auditor and those charged with governance discussed several matters. Which matter should the auditor determine to be a Key Audit Matter under SA 701?
A Key Audit Matter is one that required significant auditor attention and was of most significance in the audit, chosen from the matters communicated to those charged with governance. Under SA 701, matters causing a modified opinion are not reported as KAMs, and emphasis items belong to SA 706.
- AAny matter on which the auditor qualified the opinion
- BA matter that required significant auditor attention in the audit, selected from those communicated to those charged with governanceCorrect
- CA matter the auditor wishes to emphasise because of its importance to users
- DAll matters that were discussed with management during the audit
Explanation
SA 701 defines Key Audit Matters as those that, in the auditor's professional judgment, were of most significance in the audit, selected from matters communicated with those charged with governance. Matters giving rise to a modified opinion are not KAMs, since they are described in the basis for modification section. Emphasis of Matter is a separate concept under SA 706, and discussions with management alone do not decide KAMs.
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