The new auditing standard ASA701 Communicating Key Audit Matters in the Independent Auditor's Report is developed In the wake of the global financial crisis, in particular the collapse of Lehman Brothers.
This development is in response to calls from shareholders to know more about the companies they invest in. You are required to research the auditing issues surrounding the collapse of Lehman Brothers. Further you are required to relate the issues that led to the development of the new auditing standard ASA701 Communicating Key Audit Matters in the independent Auditor's Report.
As a result of your research, provide the key audit matters which would be required to be disclosed in the audit report to the members of Lehman Brothers if the new auditing standard ASA701 (ISA 701) had applied in the period leading up to the collapse of Lehman Brothers.
Using the reference materials available on the Internet, research the topic and discuss the auditing issues surrounding the collapse of Lehman Brothers. Explain how this was not forewarned in the auditor's report which gave an unqualified opinion before its collapse.
Explain how the new auditing standard ISA 701 Communicating Key Audit Matters in the independent Auditor's Report may provide additional information about the impending collapse of Lehman Brothers, explaining clearly what these matters are. Also, state clearly what the auditor of Lehman Brothers would have disclosed in "Key Audit Matters" if MA 701 was applicable then as well explain how this would be an improvement in auditing practice.