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Hello dear tutor
I hope that you are well…
A matter should have these 2 conditions to be included in EOM:
1-The matter must be FUNDEMENTAL for user’s understanding(which is matter of auditor’s judgement)
and 2-auditor must obtain sufficient appropriate evidence about that matter to ensure it is not materially misstated…Is it corrct to say?
For a matter to be included in KAM,it must have 2 following conditions:
1-The matter of most significance in auditor’s judgement
And 2-the auditor should obtain sufficient evidence to ensure it is not materially misstated….Thank you….
Could you not include a third comment?
“The matter should be of such material importance to the progress of the audit that it should be brought to the attention of audit committee and shareholders?”
Maybe that’s just a more flowery way of saying your first point ‘The matter of most significance in auditor’s judgement’
Thank you for your well established definition….
Examples may include:
1-Significant internal control weaknesses
2-singnificant matters which are very subjective eg:determination of F.V or impairment test of goodwill(if carrying value is significant)
3-application of new standard(eg IFRS 15)f the amount is significant
4-areas of high risks
5-significant DOUBT over Going concern
6-and as you said usually any issue which led to modificationThank you…
And is it correct to say:
We donnot have KAM in Disclaimer of opinion?And the final question about OM:
It is ANYthing else the auditor may wish to bring to the users attention but NOT presented or disclosed in the FSs….
Any thing else means…any thing even if it is not material eg:ethichal issue(finance director offered audit team insignificant gift-i know that significant gift must be rejected and brought to the attention of those charged with governance and audit committee in OM)
Is it correct?Thanks alot
‘We donnot have KAM in Disclaimer of opinion?’
Extract from the article:
‘A disclaimer of opinion is issued when the auditor is unable to form an opinion on the financial statements. ISA 705 states that when the auditor expresses a disclaimer of opinion then the auditor’s report should not include a KAM section.’
Re your final question … no! Other matters are those which are included within the pages of the ‘book’ called the Annual Report
Within the book are the financial statements but also there is a vast array of other information
The auditor is required to read through this other information looking for inconsistencies and misleading statements
If it’s misleading that’s a statement that stands alone and has nothing to do with anything within the financial statements. It’s just misleading and, if not amended upon the auditor’s request, it will be the subject of an ‘Other Matter’ modification
Inconsistent is where there is something within this non-financial statement documents that does directly compare with / relate to something within the financial statements
The auditor must first establish that the financial statements’ view on this matter is the one to be relied upon and then, if the other information is not amended to bring it in line with the financial statements, the auditor will mention it as an Other Matter
OK?
Hi Mike,
I have a question on KAM so i’m using this post instead of starting a new one.Is my understanding of a KAM below correct;
– KAM is only for listed companies?
– These are matters of most significance in our audit
– We addressed these matters in our audit, and
– Therefore, do not provide a separate opinion on these matters.Many thanks in advance
FarhanDear tutor ,
This means no need to be mentioned in EOM if the matter already stated in KAM ?
AMENDED
Does it means
1. KAM is the matter that auditor considered as most significant throughout the audit,
2. EOM is the final matter that should be mentioned to draw user’s attention ?Thanks in advance
Hi Mike,
There were examples of matters that may be KAM
e.g. impairment testing on goodwill – if i understand well, impairment tests are complex and judgmental and therefore may be KAM
Could you please tell me why the matters listed below may be KAM?
Significant operational loses
Debt refinancing
Non – compliance with loan agreementMany thanks
‘Does it means
1. KAM is the matter that auditor considered as most significant throughout the auditYes
2. EOM is any other matter from within the financial statements that should be mentioned to draw user’s attention ?’
Yes
‘Significant operational loses
Debt refinancing
Non – compliance with loan agreement’All three could be of major significance to the auditor in the process of the audit
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