{"id":2527,"date":"2022-04-22T07:02:22","date_gmt":"2022-04-22T07:02:22","guid":{"rendered":"https:\/\/www.akgvg.com\/blog\/?p=2527"},"modified":"2022-04-22T07:15:54","modified_gmt":"2022-04-22T07:15:54","slug":"key-audit-matters-in-the-auditors-report-part-ii","status":"publish","type":"post","link":"https:\/\/www.akgvg.com\/blog\/key-audit-matters-in-the-auditors-report-part-ii\/","title":{"rendered":"Key audit matters in the auditor\u2019s report \u2013 Part II"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-2532 size-full\" src=\"https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/04\/Key-audit-matters-in-the-auditor\u2019s-report-Part-ii-1.jpeg\" alt=\"\" width=\"1000\" height=\"1000\" srcset=\"https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/04\/Key-audit-matters-in-the-auditor\u2019s-report-Part-ii-1.jpeg 1000w, https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/04\/Key-audit-matters-in-the-auditor\u2019s-report-Part-ii-1-300x300.jpeg 300w, https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/04\/Key-audit-matters-in-the-auditor\u2019s-report-Part-ii-1-150x150.jpeg 150w, https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/04\/Key-audit-matters-in-the-auditor\u2019s-report-Part-ii-1-768x768.jpeg 768w, https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2022\/04\/Key-audit-matters-in-the-auditor\u2019s-report-Part-ii-1-230x230.jpeg 230w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/p>\n<p style=\"text-align: justify;\">In accordance with our <a href=\"https:\/\/www.akgvg.com\/blog\/key-audit-matters-in-the-auditors-report-part-i\/\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>previous blog<\/strong><\/a>, we&#8217;ll go through some more critical topics relating to the Key Audit Matters in this one.<strong>\u00a0<\/strong><\/p>\n<p style=\"text-align: justify;\"><strong>Key Audit Matters Not a Substitute for Expressing a Modified Opinion:<\/strong><\/p>\n<p style=\"text-align: justify;\">The auditor shouldn\u2019t communicate the matter in the Key Audit Matters section of the auditor\u2019s report when the auditor would be required to modify the opinion as per SA 705 (Revised) as a result of the matter.<\/p>\n<p style=\"text-align: justify;\"><strong>Descriptions of Individual Key Audit Matters:<\/strong><\/p>\n<p style=\"text-align: justify;\">The descriptions of each of the key audit matters in the Key Audit Matters areas of the report should have reference to related disclosures if any, in financial statements and should address:<\/p>\n<ul style=\"text-align: justify;\">\n<li>Why such matter was determined to be significant in the audit and consequently considered to be the key audit matter<\/li>\n<li>How such matter was addressed in the audit<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><strong>Circumstances where a Matter determined as a Key Audit Matter isn\u2019t part of the communication:<\/strong><\/p>\n<p style=\"text-align: justify;\">The auditor should describe each key audit matter in the auditor&#8217;s report unless either of the following applies:<\/p>\n<ul style=\"text-align: justify;\">\n<li>Any laws or regulations prevent public disclosure of such matter<\/li>\n<li>In very rare scenarios, the auditor considers that such matter shouldn\u2019t be communicated in the auditor\u2019s report because the adverse outcome of doing so would reasonably outweigh the benefits of public interest with such communication. This does not apply if information about the matter is available outside the entity.<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><strong>Form and Content of the Key Audit Matters Section in Other Circumstances:<\/strong><\/p>\n<p style=\"text-align: justify;\">In case the auditor considers, based on the circumstances and facts of the audit and entity, that there aren\u2019t key audit matters for communicating, the auditor should provide a statement separately in a section to this effect in the auditor\u2019s report under the heading \u201cKey Audit Matters\u201d.<\/p>\n<p style=\"text-align: justify;\"><strong>Placement of Key Audit Matters<\/strong><\/p>\n<p style=\"text-align: justify;\">Generally, the Key audit matters section is required to be placed after the Basis for opinion paragraph and before the Management responsibility paragraph. In case, the \u2018Material uncertainty relating to going concerned\u2019 section is required as per revised SA 570, then the Key Audit Matter section is placed after that section. When a Key Audit Matters section is presented in the auditor\u2019s report, an Emphasis of Matter paragraph may be presented either directly before or after the Key Audit Matters section, based on the auditor\u2019s judgment as to the relative significance of the information included in the Emphasis of Matter paragraph.<\/p>\n<p style=\"text-align: justify;\"><strong>Communication with Those Charged with Governance<\/strong><\/p>\n<p style=\"text-align: justify;\">The auditor shall communicate with those charged with governance:<\/p>\n<ul style=\"text-align: justify;\">\n<li>Those matters the auditor has determined to be the key audit matters<\/li>\n<li>If applicable, depending on the facts and circumstances of the entity and the audit, the auditor determines that there are no key audit matters to communicate in the auditor\u2019s report.<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><strong>Potential examples of Key Audit Matters<\/strong><strong>\u00a0<\/strong><\/p>\n<ul style=\"text-align: justify;\">\n<li>Certain complex areas relating to revenue recognition<\/li>\n<li>Provisions and contingencies<\/li>\n<li>Taxation matters (multiple tax jurisdictions, uncertain tax positions, deferred tax assets)<\/li>\n<li>Assessment of impairment<\/li>\n<li>Put arrangements over non-controlling interests<\/li>\n<li>IT systems and controls<strong style=\"font-size: 14px;\">\u00a0<\/strong><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><strong>Benefits for the stakeholders from Reporting of Key Audit Matters in Auditor\u2019s Report<\/strong><\/p>\n<ul style=\"text-align: justify;\">\n<li>Greater Transparency<\/li>\n<li>Increased communication between auditors and Those Charged with Governance<\/li>\n<li>Increased usefulness of disclosures in financial statements<\/li>\n<li>Better and clear information on significant areas<\/li>\n<li>Meaningful information for decision making and increased confidence<\/li>\n<li>Lenders can be made aware of how the company is managed<strong style=\"font-size: 14px;\">\u00a0<\/strong><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><strong>The interplay between EOM and KAM<\/strong><\/p>\n<p style=\"text-align: justify;\">When SA 701 applies, the use of Emphasis of Matter paragraphs is not a substitute for a description of individual key audit matters. In other words, when a matter has been determined to be a key audit matter, the auditor is required to include the matter in the auditor\u2019s report by SA 701. The auditor should not use an Emphasis of matter paragraph or another matter paragraph to highlight the matter instead of the requirements in SA 701 and an Emphasis of matter paragraph or the other matter paragraph cannot be used as a substitute for reporting the matter as a key audit matter.<\/p>\n<p style=\"text-align: justify;\"><strong>Documentation<\/strong><\/p>\n<p style=\"text-align: justify;\">The auditor shall include in the audit documentation:<\/p>\n<ul style=\"text-align: justify;\">\n<li>Matters that require auditor\u2019s significant attention as Key Audit Matter &amp; basis for a determination whether such matter is a Key Audit Matter.<\/li>\n<li>The rationale for the auditor\u2019s determination is that there are no key audit matters to communicate in the auditor\u2019s report.<\/li>\n<\/ul>\n<p style=\"text-align: justify;\">The rationale for the auditor\u2019s determination not to communicate in the auditor\u2019s report is a matter determined to be a key audit matter.<\/p>\n<p style=\"text-align: justify;\">This content is meant for information only and should not be considered as an advice or legal\u00a0 opinion, or otherwise. <a href=\"https:\/\/www.akgvg.com\/\" target=\"_blank\" rel=\"noopener noreferrer\"><strong>AKGVG &amp; Associates<\/strong><\/a> does not intend to advertise its services through this.<\/p>\n<p style=\"text-align: justify;\">Posted by:<\/p>\n<p style=\"text-align: justify;\">CA Ankur Vajpayee<\/p>\n<p style=\"text-align: justify;\">AKGVG &amp; Associates<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In accordance with our previous blog, we&#8217;ll go through some more critical topics relating to the Key Audit Matters in this one.\u00a0 Key Audit Matters Not a Substitute for Expressing a Modified Opinion: The auditor shouldn\u2019t communicate the matter in the Key Audit Matters section of the auditor\u2019s report when the auditor would be required&#8230;<\/p>\n","protected":false},"author":1,"featured_media":2532,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[13,213],"class_list":["post-2527","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-audit-services","tag-audit-services","tag-audit-services-in-india"],"_links":{"self":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/2527","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/comments?post=2527"}],"version-history":[{"count":4,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/2527\/revisions"}],"predecessor-version":[{"id":2533,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/2527\/revisions\/2533"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/media\/2532"}],"wp:attachment":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/media?parent=2527"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/categories?post=2527"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/tags?post=2527"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}