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This document discusses key audit matters (KAM), which are matters that were of most significance in the auditor's current period audit. The purpose of KAM is to enhance transparency in the auditor's report. KAM is determined based on areas involving significant management judgment or auditor attention. The auditor must describe each KAM under a separate heading, addressing why it was significant and how it was addressed. KAM relates only to the current audit period and is not a substitute for modifying the auditor's opinion. The auditor must document significant professional judgments regarding KAM determinations.
This document discusses key audit matters (KAM), which are matters that were of most significance in the auditor's current period audit. The purpose of KAM is to enhance transparency in the auditor's report. KAM is determined based on areas involving significant management judgment or auditor attention. The auditor must describe each KAM under a separate heading, addressing why it was significant and how it was addressed. KAM relates only to the current audit period and is not a substitute for modifying the auditor's opinion. The auditor must document significant professional judgments regarding KAM determinations.
This document discusses key audit matters (KAM), which are matters that were of most significance in the auditor's current period audit. The purpose of KAM is to enhance transparency in the auditor's report. KAM is determined based on areas involving significant management judgment or auditor attention. The auditor must describe each KAM under a separate heading, addressing why it was significant and how it was addressed. KAM relates only to the current audit period and is not a substitute for modifying the auditor's opinion. The auditor must document significant professional judgments regarding KAM determinations.
CPA in Transit Reviewer: Key Audit Matters (PSA 701R) 1
2017-2018 ed. AUDITING
I. KEY AUDIT MATTERS c. Effect on the audit of events or transactions occurred during the These are matters that, in the auditor’s period judgement, were of most significant in the NOTE: determination of key audit matters is audit of the current period. Key audit based on the results of the audit or evidence matters are selected from matters obtained. communicated to those charged with governance. Significant Auditor Attention A concept that recognizes that an audit is A) PURPOSE risk-based and identifying risks of material It is to enhance the communication value of misstatement, designing audit procedures, the auditor’s report through greater and obtaining audit evidence. transparency. Areas of significant auditor attention relates It may also assist the users in understanding to areas of complexity and significant the entity and areas of significant management judgment in the financial management judgment. statements, and therefore often involve difficult or complex auditor judgments. B) SCOPE PSA 701R only applies to complete sets of Matters of Most Significance general purpose financial statements of listed entities, circumstances where the Matters that required significant auditor auditor decides that it is necessary, and if it attention may have resulted in significant is required by law. interaction with those charged with governance. The nature and extent of Key audit matter is not a substitute for: communication about such matters with a. Disclosures those charged with governance often b. Expressing a modified opinion provides an indication of which matters are c. Reporting for Going Concern of most significance in the audit. d. It is not a separate opinion on individual matters Other considerations in identifying key audit matters: II. DETERMINING KEY AUDIT MATTERS Importance to intended user’s understanding The auditor shall take into account the Nature of the accounting policy following in determining key audit matters relating the matter that required significant auditor attention: Nature and materiality of corrected and uncorrected misstatements a. Areas of higher or significant risk of Nature and extent of audit effort material misstatement needed to address the matter b. Areas that involved significant management judgement Nature and severity of difficulties in applying audit procedures, evaluating results, and obtaining evidences
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CPA in Transit Reviewer: Key Audit Matters (PSA 701R) 2 2017-2018 ed. AUDITING Severity of control deficiencies The auditor shall not communicate a matter relevant to the matter in the Key Audit Matters section of the when When matter involves a number of the auditor issued a modified opinion. significant audit consideration Description of Individual Key Audit Matters The description of each key audit matter in the auditor’s report shall include a reference III. COMMUNICATING KEY AUDIT to the related disclosure, if any, in the MATTERS financial statements and shall address: a. Why the matter was most significant The auditor shall describe each audit b. How the matter was addressed matter, using an appropriate subheading, under the “Key Audit Matters” paragraph. Relating a matter directly to the specific circumstances of the entity may also help to Placing the separate Key Audit Matters minimize the potential that such section close to the auditor’s opinion may descriptions become overly standardized give prominence to such information and and less useful over time. acknowledge the perceived value of engagement-specific information to Original Information intended users. These are information about the entity not publicly available. It is inappropriate for an Introductory Paragraph auditor to describe using original The Introductory paragraph shall state that: information. 1. Key audit matters are those that were of most significant in the audit When such information is determined to be 2. Matters addressed were in the necessary, the auditor may encourage context of the audit of the financial management or those charged with statements as a whole, and auditor governance to disclose additional does not provide a separate opinion information, rather than the auditor on these matters. providing original information in the auditor’s report. NOTE: When comparative financial information is presented, the introductory language draws attention to the fact that IV. DOCUMENTATION key audit matters describe relate to only the audit of financial statements of the current The auditor is required to prepare a period, and may include reference to documentation that is sufficient to enable specific periods. an experienced auditor to understand significant professional judgement. Not a Substitute for a Modified Opinion The auditor shall include in the audit documentation:
Ver. 1.00 | BY: R.M.P
CPA in Transit Reviewer: Key Audit Matters (PSA 701R) 3 2017-2018 ed. AUDITING a. Matters that require significant audit attention and its rationale b. Where applicable, rationale that there is no key audit matters c. Where applicable, rationale for not communicating a matter determined to be a key audit matter.
It does not require the auditor to document
why other matters communicated with those charged with governance were not matters that required significant auditor attention.