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Hi MikeLittle
I have read the technical articles on reporting, but I’m finding it difficult to judge, if what I’ve learnt is in the right direction or not. I seek your judgement on these following:
1. KAM is used to address audit issues significant to the users of financial statement. It can be used in an UNQUALIFIED opinion.
2. EoM is used to address significant misstatements pertaining to figures in the financial statement. It can only be used with Qualified opinion.
3. OM is used to address issues of significant importance pertaining to figures NOT in the financial statement. It can only be used with Qualified opinion.
I hope these are correct. I also have a few questions.
A) When to use ‘Other information’ paragraph?
B) Is it true that in case of an adverse or disclaimer of opinion, KAM, EoM, OM, seize to exist?
C) Can there be a situation where in KAM and EoM, or KAM, EoM, OM, all come together?
D) Can KAM be used in a Qualified Report?
E) Can EoM and OM be used in an Unqualified Report?Thank You so much in advance! Means Huge!
1 Yes
2 No
3 No
4 Here are some extracts from the article (here’s the link to the article) https://www.accaglobal.com/ie/en/student/exam-support-resources/fundamentals-exams-study-resources/f8/technical-articles/auditor-report.html
A) “Emphasis of Matter and Other Matter paragraphs are still retained in ISA 706 (Revised), Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report and the concepts involved have not been overridden by the new ISA 701 requirements.”
B) No, that is not true. In the article there is an example of a qualified opinion and the report indicates that there is no KAM
However, the next 3 lines below read:
“When the auditor has expressed an adverse opinion on the financial statements and communicates KAM, it is important that the descriptions of such KAM do not imply that the financial statements as a whole are more credible in light of the adverse opinion”
Immediately below that, the article states:
“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”
C) Why not?
D) Already answered
E) Of course – see my answer to A)
OK?
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