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Hi Mike,
Hope all is well from your end.
I had a doubt regarding the key audit matters paragraph as in do we include it when a modified report has been issues with a modified opinion or modified report with an unmodified opinion (like in the case of emphasis of matter)?
And finally this is my last ACCA exam, I would like to thank you so much Mike for clearing out all of my doubts during this ACCA journey. God bless you Mike!
And thanks a lot once again.
Re the modified / unmodified opinions / reports and KAMs … a Kam paragraph is required for every public quoted entity (or public interest entity) whether or not the report / opinion is modified
Even if there are no key audit matters, a KAM paragraph is required that states “There were no key audit matters ….”
“And finally this is my last ACCA exam ……”
Thanks for your thanks but may I assume that you include all the team in your gratitude?
Hopefully I never hear from you again (except see below)!
:-)))
Good luck, and please let me know how you get on
So just a hypothetical situation, if the auditors have difficulty in obtaining sufficient and appropriate evidence for a articular balance which is material but no pervasive. In this case, they would issue a modified opinion. Would they include the same matter in the KAM as well?
Is the issue one that falls within the KAM definition of:
‘(KAMs are) those matters that, in the auditor’s professional judgment, were of most significance in the audit of the financial statements of the current period.
Key audit matters are selected from matters communicated with those charged with governance.’
I would imagine that your hypothetical scenario would fit into that definition so would be the subject of a KAM
Wouldn’t we be including this twice? Once in the Basis of Qualified Paragraph and the second time in the KAM paragraph?
This is an extract from the technical article “The new auditor’s report”
“Example – Qualified ‘except for’ opinion issued but no key audit matters
The audit of Turquoise Industries Co has been completed and the auditor discovered a material amount of research expenditure which had been capitalised as an intangible asset in contravention of IAS 38 Intangible Assets. The finance director refused to derecognise the research expenditure as an intangible asset and include it in profit or loss and the auditor therefore issued a qualified ‘except for’ opinion on the basis of disagreement with the entity’s accounting treatment for research expenditure.
The auditor has concluded that there are no KAM which require to be communicated in the audit report. The KAM section of the report will therefore be as follows:
Key audit matters
Except for the matter described in the Basis for Qualified Opinion section, we have determined that there are no key audit matters to communicate in our report.”
So it would appear that, where the reason for a modification is fully explained in the Basis paragraph, it will be referred to in the KAM paragraph, but not repeated
OK?
Yes that became clear now.
And sorry one more thing, if the matter was immaterial, then you can include in the KAM yeah?Thank you once again Mike.
Thanks a lot Opentuition. Keep up the great work!!!
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