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Hi Mike.
I have several questions
1) if an adverse opinion is issued, is it necessary to state the reasons in KAM about why we arrived at that conclusion?2) matters identified as high risk at planning stage could be a KAM right? now what if that risk is mitigated and is very trivial at completion stage? Will it still be a KAM in the report?
1) No – the KAM paragraph(s) are there ‘to enhance the communicative value of the auditor’s report by providing greater transparency about the audit that was performed. Communicating key audit matters provides additional information to intended users of the financial statements to assist them in understanding those matters that, in the auditor’s professional judgment, were of most significance in the audit of the financial statements of the current period. Communicating key audit matters may also assist intended users in understanding the entity and areas of significant management judgment in the audited financial statements’. (Quote from IAS 701)
It’s a communicative enlightening paragraph to improve a reader’s understanding of what the auditor found to be of most significance during the course of the audit
If a matter is the subject of a modification in the audit opinion, that “Basis of qualified opinion” paragraph should explain the reason in sufficient detail and note that the KAM is NOT an alternative for a modified opinion
From the quoted paragraph above …
“about the audit that was performed” and
“were of most significance in the audit of the financial statements”
So where a matter may have been identified as a potential for extra attention but then discovered to be non-key, there’s no need to mention it
OK?
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