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There may be a matter which is not determined to be a KAM, but which, in the auditor’s judgement is fundamental to users’ understanding and for which an Emphasis of Matter paragraph may be considered necessary. this from an article sir, can u give some examples, as far as i can tell anything that requires emphasis should be KAM
No, just because it’s significant, it could easily not have caused the auditor to scratch his / her head and struggle over the auditing of the matter
Not all significant matters need necessarily to be brought to the attention of those charged with governance
Extract from the technical article:
“There may be a matter which is not determined to be a KAM, but which, in the auditor’s judgement is fundamental to users’ understanding and for which an Emphasis of Matter paragraph may be considered necessary”
And another, an example of a KAM
“Significant auditor judgments in relation to areas of the financial statements that involved significant management judgment. This might include accounting estimates which have been identified by the auditor as having a high degree of estimation uncertainty”
Concentrating on those last few words, if there were not a high degree of estimation uncertainty, but there is a smaller degree of estimation uncertainty, it could avoid being dealt with a s a KAM but still be in an area where it needs to be emphasised
Until I start to see some in practice, it’s a little bit awkward trying to make them up
In the exam, if it comes up, the examiner will give you a situation where emphasis is appropriate but it’s not significant enough to be a KAM
Probably
Sir previous audit report question stil valid for dec16 attempt to some extent
BEWARE previous answers! The December 2016 exam is based on the new ISA 701 and answers to previous exam questions are based on the old format and content
Principles are the same – requirement for an annual report from an independent auditor expressing an opinion of the truth and fairness of the view shown by the financial statements – but content and format changed radically (as you know)
Hi Mike
Please ca i ask your advise – im going though Dec 2011 Yew question and trying to apply the new audit report
There is a overstatement of Intangible assets of 12.5m of which is material
54% PBT
6% Total AssetsAnd co is struggling to raise finance with only 125.000 in bank
If the fs are not amended –
Would the new report or Audit opinion be as follows
1)Opinion – Qualified “except for ” ( material but no pervasive)
2) Basis for opinion – we conducted Audit accordance with isa etc
3) Material Uncertainity relating to going concern – we draw attention to note 2 in sofp
– overstatement of development costs -should be treated as expense as no sufficient Audit evidence to confirm that future economic benefits will flow to the entity and they do not have sufficient funds to complete the research in accordance with IAS 38
4) KAM – Audit evidence before completion of the audit – was that Mgt representations that there will be little no use for the reseach to be completed even thou the chairman will not change his report or sofp to change the accounting treatment ..Am i off track i what im saying Mike or do you think its okay
Would i include an eom ??
And finally if the mgt and chairman agree to change the report and we conduct further tests and amend our reports – Would it still be unmodified opinion ?based on the original error
Thanks a million
That seems to be ok
“Would i include an eom ??”
Not if the matter is already the subject of a KAM
It still looks like a matter for a qualified opinion – serious doubt about the recoverability of the capitalised development costs – disagreement re accounting treatment
Ah thanks a million Mike …
I was beginning to panic if i was understanding it correctly
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