New audit report

I believe that this extract answers both your questions!

“A matter giving rise to a qualified or adverse opinion in accordance with proposed ISA 705 (Revised) or the existence of a material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern (hereinafter referred to as “material uncertainty”) in accordance with proposed ISA 570 (Revised) is by its nature a key audit matter.

However, the auditor shall:

(a) Report on these matter(s) in accordance with the applicable ISA(s);

(b) Not describe these matter(s) in the Key Audit Matters section of the auditor’s report; and

(c) Include a reference to the Basis for Qualified (or Adverse) Opinion or the Going Concern section(s) in the introductory language of the Key Audit Matters section.”

Does that do it for you?

‘So, if the opinion is unqualified, there will be no KAM?’

How have you arrived at that conclusion? There’s nothing that I have written that could have led you to this comment!

Here’s the definition of KAM:

‘Key audit matters—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.’

And here’s a longer extract from the standard:

Communicating Key Audit Matters

The auditor shall communicate the key audit matters
in a separate section of the auditor’s report under the heading “Key Audit Matters.”

The auditor’s report shall state that:

(a) Key audit matters 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];

(b) Key audit matters are selected from matters communicated with [those charged with governance], but are not intended to represent all matters that were discussed with them;

(c) The auditor’s procedures relating to these matters were designed in the context of the audit of the financial statements as a whole; and

(d) The auditor’s opinion on the financial statements is not modified with respect to any of the key audit matters, and the auditor does not express an opinion on these individual matters

The auditor shall describe each key audit matter in the Key Audit Matters section using an appropriate subheading, except where a qualified or adverse opinion is being given of material uncertainty re going concern is appropriate.

The description of each key audit matter shall include:

(a) An explanation of why the auditor considered the matter to be one of most significance in the audit and, to the extent the auditor considers it necessary as part of this explanation, its effect on the audit; and

(b) A reference to the related disclosure(s), if any, in the financial statements.

OK now?

Thanks for your input …

… but that’s not what hermine was going on about

“what is the meaning of “but that’s not what HERMINE was going on about”?”

This was hermine’s question

‘So, if the opinion is unqualified, there will be no KAM?’

Now, what has that got to do with fraud? On the contrary, the opinion would not be unqualified were there to be fraud identified

Re Teeboyz involvement …

… there should not be a situation where an audit opinion is given whilst fraud has been discovered and still continues

What you and Teeboyz are suggesting is that the auditors have uncovered a fraud but the situation is still on-going. That’s unconscionable. Even if that discovery and consequential work may delay the publication of the financial statements

If the fraud is immaterial in monetary terms and the person has been sacked, this is a situation where the event should be brought to the attention of those charged with governance but is possibly not a key audit matter – that depends upon the magnitude of the offence and the identity of the perpetrator

But whatever the value and the identity, there can be no concept of tipping-off – fraud has been notified to the relevant authorities. If they are slow in their reactions, that will presumably delay publication but even then, management will have been notified (unless it’s management that is committing the fraud)