Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Distinguishing between KAM and EOM paragraph
- This topic has 3 replies, 3 voices, and was last updated 8 years ago by Ken Garrett.
- AuthorPosts
- August 23, 2016 at 12:34 pm #334731
One question: Following the introduction of ISA 701 Communicating Key Audit Matter in the Independent Auditors report im really finding it hard to distinguish between when to use EOM paragraph and when to highlight an issue as KAM. My understanding is that an Emphasis of Matter paragraph is used to stress the importance of an item ALREADY DISCLOSED in the the financial statements which is fundamental to users’ understanding of Financial Statements while key audit matters are those significant audit matters that were communicated to the audit committee and the board so information which is not available to other users of the financial statements.
Am I being correct in my distinction between the two?
August 23, 2016 at 6:47 pm #334777KAM = anything that had a major bearing on the audit and the judgement that the FS show a T&F view. KAM are communicated to the audit committee and not to the shareholders through the audit report.
EOM = where the auditors want to draw attention to something already disclosed in the etc. as you say).
So, the auditors might say that a KAM was how much profit to take on a contract lasting more than one financial period. They could have done lots of work on that and would have to make some judgements. However, if they are happy with the valuation and profit, having mentioned it in KAM, that would be an end of it. There is not necessarily material uncertainty just because judgement has been used.
THhe commonest example of EOM is referencing a note in the FS about the going concern of the company. As far as I understand it there is no reason why that could not also be mentioned in KAM as well as in EOM.
We really have to see how things settle down in practice as new audit reports are issued.
HTH
September 4, 2016 at 11:39 pm #337799from my understanding of the technical article on new auditor’s report, EOM and other matter should not be included if the matter concerned has been determined to be KAM.
And issues to do with going concern are usually most significant in the audit of the FS for the current period hence can not be included under both EOM and KAM.
i stand to be corrected if i misunderstood.September 5, 2016 at 8:34 am #337836The first example in the technical article is one in which there is a going concern. There is the new ‘Material uncertainty relating to going concern’ para (like a special EOM). The KAM does refer to that paragraph in the example, though does not repeat the details.
You are right about other matters: mention in KAM and EOM are mutually exclusive.
- AuthorPosts
- You must be logged in to reply to this topic.