Page 190 - AAA Integrated Workbook STUDENT S18-J19

Chapter 11 4

Key audit matters

ISA 701 Communicating Key Audit Matters in the Independent Auditor's Report
requires auditors of listed companies to determine key audit matters and to
communicate those matters in the auditor's report.

Auditors of non-listed entities may voluntarily, or at the request of management or
those charged with governance, include key audit matters in the auditor's report.

Key audit matters are those that in the auditor's professional judgment
were of most significance in the audit and are selected from matters
communicated to those charged with governance.

The purpose of including these matters is to assist users in understanding the entity,
and to provide a basis for the users to engage with management and those charged
with governance about matters relating to the entity and the financial statements.

Each key audit matter should describe why the matter was considered to be
significant and how it was addressed in the audit.

Key audit matters include:

 Areas of higher assessed risk of material misstatement, or significant risks
identified in accordance with ISA 315 (Revised) Identifying and Assessing the
Risks of Material Misstatement Through Understanding the Entity and its
Environment.

 Significant auditor judgments relating to areas in the financial statements that
involved significant management judgment, including accounting estimates that
have been identified as having high estimation uncertainty.

 The effect on the audit of significant events or transactions that occurred during
the period.

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