{"id":69,"date":"2019-05-04T08:46:17","date_gmt":"2019-05-04T08:46:17","guid":{"rendered":"http:\/\/akgvg.com\/blog\/?p=69"},"modified":"2026-03-06T11:17:00","modified_gmt":"2026-03-06T05:47:00","slug":"key-audit-matters","status":"publish","type":"post","link":"https:\/\/www.akgvg.com\/blog\/key-audit-matters\/","title":{"rendered":"Key Audit Matters"},"content":{"rendered":"<p style=\"text-align: left;\">With the purpose of enhancing the communicative value of auditor\u2019s report by offering better transparency about audit and providing additional information to the users of financial statements, for the first time, <a href=\"https:\/\/www.akgvg.com\/audit-assurance-services\"><strong>audit<\/strong><\/a> reports of listed companies for the Financial year 2018-19 will contain a Key Audit Matters (KAM) as per Standard on Auditing (SA) 701.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.akgvg.com\/blog\/key-audit-matters\/#Matters_that_may_be_reported_as_KAM\" >Matters that may be reported as KAM<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.akgvg.com\/blog\/key-audit-matters\/#Going_concern_as_a_KAM\" >Going concern as a KAM:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.akgvg.com\/blog\/key-audit-matters\/#Expected_benefits_of_KAM\" >Expected benefits of KAM:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.akgvg.com\/blog\/key-audit-matters\/#Identificationdetermination_of_KAM\" >Identification\/determination of KAM:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.akgvg.com\/blog\/key-audit-matters\/#Description_of_KAM\" >Description of KAM<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.akgvg.com\/blog\/key-audit-matters\/#Communicating_of_KAM\" >Communicating of KAM<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.akgvg.com\/blog\/key-audit-matters\/#Types_of_KAMs_not_to_be_reported\" >Types of KAMs not to be reported<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Matters_that_may_be_reported_as_KAM\"><\/span><strong>Matters that may be reported as KAM<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul style=\"text-align: left;\">\n<li>Impairment;<\/li>\n<li>Provision for losses;<\/li>\n<li>Valuation of financial instruments;<\/li>\n<li>Revenue recognition;<\/li>\n<li>Taxation Matters etc.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Going_concern_as_a_KAM\"><\/span><strong>Going concern as a KAM:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul style=\"text-align: left;\">\n<li>\n<p style=\"text-align: justify;\">SA 701 highlights that a material uncertainty related to going concern is, by its nature, a KAM. These matters are to be reported in accordance with SA 570, Going Concern.<\/p>\n<\/li>\n<li>\n<p style=\"text-align: justify;\">In the KAM section, reference to the basis of qualified\/ adverse opinion or the material uncertainty related to going concern section should be given.<\/p>\n<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Expected_benefits_of_KAM\"><\/span><strong>Expected benefits of KAM:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p style=\"text-align: left;\">Better governance since it encourages two-way communication between the auditor and TCWG (Those Charged With Governance).<\/p>\n<ul style=\"text-align: left;\">\n<li>\n<p style=\"text-align: justify;\">Improve overall quality of audits as the auditor would have greater focus on areas requiring careful judgement.<\/p>\n<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Identificationdetermination_of_KAM\"><\/span><strong>Identification\/determination of KAM:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p style=\"text-align: left;\">While determining the KAM, which are to be reported in the auditor\u2019s report, the auditor will have to follow filter approach as mentioned below:<\/p>\n<p style=\"text-align: left;\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-70\" src=\"http:\/\/akgvg.com\/blog\/wp-content\/uploads\/2019\/05\/WhatsApp-Image-2019-05-04-at-1.21.04-PM.jpeg\" alt=\"\" width=\"676\" height=\"343\" srcset=\"https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2019\/05\/WhatsApp-Image-2019-05-04-at-1.21.04-PM.jpeg 676w, https:\/\/www.akgvg.com\/blog\/wp-content\/uploads\/2019\/05\/WhatsApp-Image-2019-05-04-at-1.21.04-PM-300x152.jpeg 300w\" sizes=\"auto, (max-width: 676px) 100vw, 676px\" \/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Description_of_KAM\"><\/span><strong>Description of KAM<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p style=\"text-align: left;\">Auditor is required to report in his report a further description of each of KAM by stating that<\/p>\n<p style=\"text-align: left;\"><strong>-Why\u00a0<\/strong>the matter was one of the most significance in the audit?<\/p>\n<p style=\"text-align: left;\"><strong>-How\u00a0<\/strong>the matter was addressed in the audit?<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Communicating_of_KAM\"><\/span><strong>Communicating of KAM<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p style=\"text-align: left;\">There is no limit on the number of matters that can be reported as KAM. A separate section with title \u201cKey Audit Matters\u201d is to be included in the auditor\u2019s report. In this section the language should clearly cover the following:<\/p>\n<ul style=\"text-align: left;\">\n<li>\n<p style=\"text-align: justify;\">KAM are those matters that in the auditor\u2019s professional judgement, were of the most significant in the audit of the financial statements of the current period; and<\/p>\n<\/li>\n<li>\n<p style=\"text-align: justify;\">These matters were addressed in the context of the audit of financial statements as a whole, and in forming the auditor\u2019s opinion thereon, and the auditor does not provide a separate opinion on these matters.<\/p>\n<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Types_of_KAMs_not_to_be_reported\"><\/span><strong>Types of KAMs not to be reported<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p style=\"text-align: left;\">Under the following circumstances, a matter determined to be a KAM is not required to be communicated in the auditor\u2019s report:<\/p>\n<ol style=\"text-align: left;\">\n<li>a) Law or regulation precludes public disclosure about the matter.<\/li>\n<li>b) The auditor determines that the matter should not be communicated in the auditor\u2019s report.<\/li>\n<\/ol>\n<ul>\n<li style=\"text-align: left;\">\n<p style=\"text-align: justify;\">In such a case, a written representation from management, and when appropriate, TCWG(Those Charged With Governance), could be obtained as to why public disclosure about the matter is not appropriate, including management\u2019s view about the significance of the adverse consequences that may arise as a result of such communication.<\/p>\n<\/li>\n<li>\n<p style=\"text-align: left;\">Apart from the above, there could be very limited situations (such as listed entity with very limited operations) where there are no KAMs to be communicated. However, in such a case also, KAM section will be given in the auditor\u2019s report.<\/p>\n<\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><strong>Disclaimer: <\/strong>This content is meant for information only and should not be considered as an advice or opinion, or otherwise. AKGVG &amp; Associates does not intend to advertise its services through this.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>With the purpose of enhancing the communicative value of auditor\u2019s report by offering better transparency about audit and providing additional information to the users of financial statements, for the first time, audit reports of listed companies for the Financial year 2018-19 will contain a Key Audit Matters (KAM) as per Standard on Auditing (SA) 701&#8230;.<\/p>\n","protected":false},"author":1,"featured_media":6914,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[343,1933,13,1931,1930,1932,1929,1927,1926,1928,1934],"class_list":["post-69","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-audit-services","tag-akgvg-associates","tag-audit-reporting-india","tag-audit-services","tag-audit-transparency","tag-auditor-reporting-standards","tag-financial-statement-audit","tag-isa-701-key-audit-matters","tag-kam-in-auditing","tag-key-audit-matters","tag-key-audit-matters-audit-report","tag-statutory-audit-india"],"_links":{"self":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/69","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=69"}],"version-history":[{"count":8,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/69\/revisions"}],"predecessor-version":[{"id":6915,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/69\/revisions\/6915"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/media\/6914"}],"wp:attachment":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/media?parent=69"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/categories?post=69"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/tags?post=69"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}