CA Intermediate · Auditing and Ethics · Audit Report
Rao & Co., auditors of Zenith Ltd, a listed company, are determining which matters to communicate as Key Audit Matters (KAMs) under SA 701. Which statement correctly reflects the standard?
Key Audit Matters are those matters, chosen from items communicated with those charged with governance, that required significant auditor attention and were of most significance in the current period audit. They do not replace a modified opinion and are mandated mainly for listed entities.
- AKAMs are matters that required significant auditor attention and were of most significance in the audit of the current period, chosen from matters communicated with those charged with governanceCorrect
- BKAMs are all matters communicated with those charged with governance during the audit
- CKAMs substitute for a modified opinion where the matter is material
- DKAMs are required for every entity, including unlisted private companies
Explanation
SA 701 requires the auditor to select, from matters communicated with those charged with governance, those that required significant auditor attention, and then determine those of most significance. It is not all matters communicated. KAMs are not a substitute for modification and apply to listed entities (or where otherwise required or voluntarily decided).
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