Page 165 - CA Final PARAM Digital Book.

Part 2- SA 701

QNO No need to communicate KAM Old Course – (M18M, N18M, M18R)
112.000 TITANIUM CNO— SA701.120
Key Audit Matters and Circumstances in Which a Matter Determined to Be a Key Audit Matter Is Not

Communicated in the Auditor’s Report.
Answer Part I -- Relevant Standards & Laws
▪ SA 701 – Communicating Key Audit Matters In The Independent Auditor’s Report

Part II -- Requirements of Relevant Standards & Laws
➢ Key Audit Matters— As per SA 701, “Communicating Key Audit Matters in the Independent
Auditor’s Report (New)”, 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.

➢ Circumstances in Which a Matter Determined to Be a Key Audit Matter Is Not
Communicated in the Auditor’s Report:
The auditor shall describe each key audit matter in the auditor’s report unless:
• Law or regulation precludes public disclosure about the matter; or
• In extremely rare circumstances, the auditor determines that the matter should not be
communicated in the auditor’s report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest benefits of such
communication. This shall not apply if the entity has publicly disclosed information about
the matter.

No Communication of some KAM items

1. Law / Regulations Prohibits (Eg SFIO) 2. Adverse Consequences more than Public Interest (Eg Cyrus Mistry Vs TAT A)

If there is No Key Audit Matter or Key Audit Matters Exist but not Reported as per reasons given above then include a
statement under heading key Audit Matter and explain this fact.

QNO Draft Key Audit Matter - When No KAM Identified New Course – (SM23)
112.050 TITANIUM CNO-- SA701.120

Illustrate the presentation in the auditor’s report if the auditor has determined there are no key audit
matters to communicate:
Answer [Except for the matter described in the Basis for Qualified (Adverse) Opinion section or Material Uncertainty
Related to Going Concern section,] We have determined that there are no [other] key audit matters to
communicate in our report.]

QNO Determining Key Audit Matters Old Course – (M18M, N19M, M19E)
112.100 TITANIUM CNO— SA701.100
AKY Ltd. is a listed company engaged in the business of software and is one of the largest company operating
in this sector in India. The company’s annual turnover is Rs. 40,000 crores with profits of Rs. 5,000 crores.
Due to the nature of the business and the size of the company, the operations of the company are spread
out in India as well as outside India. The company’s contracts with its various customers are quite
complicated and different. During the course of the audit, the audit team spends significant time on audit
of revenue – be it planning, execution or conclusion. This matter was also discussed with management
at various stages of audit. The efforts towards audit of revenue also involve significant involvement of
senior members of the audit team including the audit partner. After completion of audit for the year ended
31 March 2019, the audit partner was discussing significant matters with the management wherein they

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