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ASA701 Communicating Key Audit Matters

tag 0 Download 10 Pages / 2,413 Words tag 28-06-2021
  • Course Code: ASA701
  • University: Curtin University
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  • Country: Australia


This Auditing Standard represents the Australian equivalent of ISA 701 Communicating Key Audit Matters in the Independent Auditor’s Report (January 2015).

This Auditing Standard contains differences from the ISA 701, which have been made to accord with the Australian legislative environment and to maintain audit quality where the AUASB has considered there are compelling reasons to do so.

This Auditing Standard establishes requirements and provides application and other explanatory material regarding the communication of key audit matters (KAM) in the independent auditor’s report. The introduction of ASA 701 reflects the AUASB’s commitment to conformity with the recent enhancements to auditor reporting developed by the International Auditing and Assurance Standards Board. The main features of this new standard include:

(a) Mandating the communication of KAM in the auditor’s reports of audits of listed entities;

(b) Enabling auditors of other entities to decides whether to include KAM in their auditor’s reports;

(c) How the auditor determines KAM:

(i) Determining from the matters communicated with those charged with governance, those matters that required significant auditor attention;

(ii) Taking into account areas of higher assessed risk, significant auditor judgements, involving significant management judgements and the effects of significant events or transactions; and

(iii) Determining the most significant matters for inclusion in the auditor’s report;

(d) How the auditor is to describe individual KAM;

(e) Circumstances in which a matter determined to be a KAM is not communicated in the auditor’s report; and

(f) The audit documentation requirements relating to KAM.

Scope of this Auditing Standard

  1. This Auditing Standard deals with the auditor’s responsibility to communicate key audit matters in the auditor’s report. It is intended to address both the auditor’s judgement as to what to communicate in the auditor’s report and the form and content of such communication.
  2. The purpose of communicating key audit matters is to enhance the communicative value of the auditor’s report by providing greater transparency about the audit that was performed. Communicating key audit matters provides additional information to intended users of the financial report (“intended users”) to assist them in understanding those matters that, in the auditor’s professional judgement, were of most significance in the audit of the financial report of the current period. Communicating key audit matters may also assist intended users in understanding the entity and areas of significant management judgement in the audited financial report. (Ref: Para. A1–A4)
  3. The communication of key audit matters in the auditor’s report may also provide intended users a basis to further engage with management and those charged with governance about certain matters relating to the entity, the audited financial report, or the audit that was performed.
  4. Communicating key audit matters in the auditor’s report is in the context of the auditor having formed an opinion on the financial report as a whole. Communicating key audit matters in the auditor’s report is not:

(a) A substitute for disclosures in the financial report that the applicable financial reporting framework requires management to make, or that are otherwise necessary to achieve fair presentation;

(b) A substitute for the auditor expressing a modified opinion when required by the circumstances of a specific audit engagement in accordance with ASA 705;

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